Tax
credit for 2008 only for people who did not receive the economic
stimulus
The recovery rebate credit is a special federal tax credit for 2008
only. The credit is available for individuals who did not apply for
the economic stimulate rebate in 2007. The recovery rebate credit is
also available for people who's rebate is higher when calculated
using their 2008 financial information.
In
2007, Congress authorized the IRS to issue advance tax refunds
called the economic stimulus rebate. These advance rebates were
calculated using information from a person's 2007 tax return.
Some
people did not receive their stimulus rebate. Perhaps because they
did not file a return. Or perhaps because they filed their return
after the October 15th deadline. Or perhaps because they did not
qualify for the stimulus rebate because their income was too low or
too high.
Such
individuals are eligible to claim a recovery rebate credit. The
credit is calculated using the same criteria as the stimulus rebate.
The difference is the recovery rebate uses 2008 income information.
That means a change in your income or dependents might make you
eligible for a higher rebate amount.
Technically, the recovery rebate is the difference between the tax
credit amount as calculated using your 2008 information, minus any
stimulus payment you received. If your 2008 credit is higher, you
get the difference. If the credit as calculated using your 2008
figures is lower, you don't have to repay the difference. The
recovery rebate shows up as a refundable tax credit on line 70 of
Form 1040.
What's the Maximum Recovery Rebate Credit?
$600
for unmarried persons and $1,200 for married couples. Plus an
additional $300 per qualifying child. The credit is reduced by any
economic stimulus rebate you received.
How Will the Recovery Rebate be Calculated?
The
rebate is limited to the net tax liability. For many people, this
amount will be the same as found on Form 1040 Line 56, Form 1040A
Line 37, or Form 1040EZ Line 11. The rebate is reduced if the net
tax liability is less than the maximum credit. The rebate will also
be reduced for people with higher incomes. The stimulus rebate is
reduced by 5 percent of the amount of income in excess of $75,000
(or $150,000 for married couples).
The
IRS has provided a worksheet for calculating the recovery rebate
credit on pages 61 and 62 of the
Instructions for Form 1040
You
can also ask the IRS to calculate your rebate recovery credit for
you. On the dotted lines next to Form 1040 line 70 write in "RRC."
Who's Eligible for the Rebate?
Individuals who have at least $3,000 in qualifying income, and who
did not receive their stimulus rebate in 2008 or whose rebate is
higher when calculated using their 2008 financial information.
Who's Not Eligible for the Rebate?
Dependents, or people who could be claimed as dependents by another
taxpayer, are not eligible. Also ineligible are non-resident aliens,
anyone without a valid Social Security Number, and estates and
trusts.
What's Qualifying Income?
Wages, self-employment, Social Security benefits, Railroad
Retirement benefits, and veterans' disability compensation, pension
or survivors' benefits received from the Department of Veterans
Affairs in 2008. Supplemental Security Income (SSI) does not qualify
for the recovery rebate.
Qualifying Children and Dependents
Any
child under age 17 who is related to the taxpayer by blood,
marriage, adoption or foster arrangement and whom the taxpayer can
claim as a dependent for 2008. Dependents age 17 and over do not
qualify for the additional rebate. Dependents of any age do not
qualify for the rebate in their own name even if they earn their own
income.
How will the Recovery Rebates be Processed
The
IRS will issue the recovery rebate as part of the taxpayer's refund.
Unlike in 2008, the IRS will not send out two separate refunds.
Rebates will be sent by direct deposit, if bank account information
was provided on the 2008 tax return, or by paper check.
Filing a Return
Individuals must file a 2008 tax return to receive the recovery
credit. Even if the person does not have a filing requirement and
does not have a tax liability, they will still need to file a return
so that the IRS will know that the person qualifies for the recovery
credit.
If
you are filing a 2008 tax return solely for the purpose of claiming
the stimulus rebate repayment, show your nontaxable Social Security
benefits, veteran's disability pension, or Railroad Retirement
benefits on Form 1040 Line 20a or on Form 1040A Line 14a. This will
let the IRS know that you have qualifying income for the purposes of
the recovery rebate, even if you have no taxable income.
Direct Deposit Issues
The
IRS prefers to send out refunds via direct deposit. This means you
need to make sure your direct deposit information is absolutely,
positively, 100% accurate. Any mistake here could result in
losing your rebate forever.
IRS Tools to Help You Out
The IRS will be launching two applications to help people with the
recovery rebate. This will include an application to look up what
your economic stimulus payment was in 2008, and the other will be a
rebate recovery calculator.
