My wife recently called me in a panic the other day. Several of her girlfriends had told her that our stimulus checks ($1,800 for us) from last year were actually a loan from the federal government (like the $7,500 first-time homebuyers tax credit) and would be taken back from our tax returns this year. My wife and I were really upset. Contrary to normal financial planning advice, we use our annual tax refunds like a bonus check to us. My wife had actually already spent her portion of the money in her head (we split it 50/50, no questions asked).
I am here to tell you that this rumor is NOT true! Lay that rumor to bed. It is false!
The paying of unclaimed stimulus checks must be the culprit for the rumor mill running on overdrive in this case. In 2008, the U.S. Treasury paid many people an economic stimulus payment based on their 2007 tax return information. If you did not receive the full stimulus payment last year or your tax situation has changed for 2008, you may be eligible to recover the credit for the unpaid amount when you file your taxes this year. Clear as mud?
The government did not pay a lot of people (elderly, etc.) the stimulus check that they were owed last year or people never got the check (literally lost in the mail). So, if the government owes you your stimulus check, you can get what is still owed to you when you file this year’s taxes. That is it. Below are some of the frequently asked questions about the subject from the IRS website.
Q. Is my stimulus payment taxable?
A. No. You will not owe tax on your payment when you file your 2008 federal income tax return. But you should keep a copy of the IRS letter you receive later this year listing the amount of your payment.
Q. If my stimulus payment is not going to affect my 2008 tax refund or increase the tax I owe next year, why is it I need to retain the letter that lists how much I received?
A. In the event you do not qualify for the full amount on your 2007 return but you do on your 2008 return, you will need to have the letter as a record of the amount you previously received.
Q. Will the payment I receive in 2008 reduce my 2008 refund or increase the amount I owe for 2008?
A. No, the stimulus payment will not reduce your refund or increase the amount you owe when you file your 2008 return.
So, now you know….and knowing is half the battle! Now go stimulate the economy and spend those refunds!