WASHINGTON (AP) ó It’s not often the government gives you a second chance at some extra cash if you miss out the first time.
But that’s the case with the Recovery Rebate Credit, part of the economic stimulus package that was passed by Congress in 2008. The idea was that if you put more money into the hands of consumers, they would start spending again and help spur more economic activity.
The stimulus checks mailed out last year were actually an advance on the credit, the government’s way of getting the money to people sooner.
Taxpayers got a maximum $600 each ó $1,200 if married filing jointly ó plus $300 per child. The credit started phasing out for individuals whose income was higher than $75,000, or $150,000 for married couples filing jointly. For individuals who were eligible, the minimum payment was $300.
Treasury paid out about $96 billion in stimulus checks in 2008.
“The economic stimulus package that I signed earlier this year is having its intended effect,” President Bush said in August. “Many Americans who received tax rebates are spending them. Businesses are taking advantage of tax incentives to purchase new equipment this year. And there are signs that the stimulus package will continue to have a beneficial impact on the economy in the second half of the year.”
But the effect was short-lived. Consumers started pulling back even further, hit by rising prices, falling home values, deepening unemployment and tight credit. And that spelled doom for the economy, since consumer spending is its lifeblood.
The initial rebates were based on the 2007 tax return. If your income has fallen or your family situation has changed and you weren’t eligible for a stimulus check last year, or got a reduced one, you might be able to get the Recovery Rebate Credit when you file for 2008. It is estimated that an additional $10 billion will get paid through the credit this year.
This takes on added importance in today’s economic morass. More than 10 million people are unemployed, and prospects for finding jobs are dimmer in a recession that is expected to be the longest since the Great Depression. Since the recession began in December 2007, about 2 million jobs have been lost. Analysts say an additional 3 million could disappear between now and the spring of 2010.
Even those who received the full amount in their stimulus check last year could be eligible for an additional $300 for the birth or adoption of a child in 2008.
Others who may qualify this year:
– A retiree or veteran who did not receive at least $3,000 in benefits in 2007 but did last year.
– A person who was claimed as a dependent on a tax return in 2007 but was not in 2008.- People who did not have a Social Security number in 2007 but did in 2008.
Taxpayers can either calculate the rebate credit due them or have the IRS do it. If you want the IRS to figure out whether you’re due a rebate, write RRC on line 70 of Form 1040. There are other notations for those who received veterans’ disability and death benefits or who had nontaxable combat pay. See the instructions accompanying the tax form.
The instructions also contain a worksheet for figuring out your rebate credit yourself. It should be filled out after you fill out your tax return. If you received a stimulus check last year, make sure you have Notice 1378 on hand to tell you how much it was.
There also will be tools on the IRS Web site to help. Like last year’s Economic Stimulus Payment Calculator, the IRS is expected to post by the end of January a calculator to help you see if you’re eligible and how much you’re due. A second tool will help you figure how much of a stimulus payment you received in 2008.
Tax preparation software, too, will walk you through the steps.
And here’s an added bonus: While the money goes into your pocket, it’s a credit, not income, and therefore not taxable.
“A lot of people thought, ‘Will I have to report it as income?’ The answer is no,” said Bob Meighan, vice president for the Consumer Tax Group of Intuit Inc., publisher of the tax-preparation software TurboTax.