What Exactly Is The Stimulus Check? Not A Rebate?

Posted on May 14, 2008

As I discussed whether it’s our patriotic duty to consume our rebate checks, I started thinking that I didn’t fully understand what the ‘rebate’ check is anymore. Everyone calls it a tax rebate check, but it seems to have morphed into a handout or something else along the lines. Originally, it seemed like it would be rebate on our 2008 taxes based on our 2007 returns.

It doesn’t seem to be that clear cut anymore. Even the language of the media and the IRS website don’t seem to mention rebate anymore, just payment. Is it a handout? Is it a rebate? A modified one time tax cut? Let’s dig into a few specifics to try and figure out what it really is.

First it isn’t taxable income or a rebate, since your 2007 and 2008 taxes won’t seem to be effected. A rebate is a refund for money you paid. According to the IRS :

It’s not taxable, and it won’t reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return. (1)

The next thing of note is that some groups of people are eligible who don’t pay taxes.

Families with children under 17 generally will qualify for an additional payment. Some people with no tax liability also will qualify. This includes Social Security and Railroad Retirement beneficiaries, recipients of certain veterans’ payments, low-income workers with earned income and/or benefits of at least $3,000 and individuals who have combined income of at least $3,000 from any combination of these sources. (2)

So there is an element to the stimulus package that includes handouts. Depending on your stance that may be fine, but it wasn’t how the original package was ’sold’.

Finally, the benefit starts to phase out for people “with adjusted gross incomes (AGI) over $75,000 and married couples who file a joint return with AGI over $150,000.(3)” Some people will get no stimulus.

So it what it looks like is a one time tax cut, with a hand out portion, for middle and low income people. No rebate, just government borrowing money to hopefully support our overconsumption in hopes that it will stimulate the economy. Overconsumption could be argued as a big reason why we need economic ’stimulus’ in the first place. And I thought they had a plan to pay the money back with 2008 tax money…silly me. Borrow and spend without a plan, a basic tenant of solid personal finance, right? Either way, I am personally glad to receive a $1,500 check in electronic mail, but I at least want to know what the money is and were it is coming from.

Source :
(1) - IRS Basic Stimulus Information
(2) - IRS Stimulus FAQ
(3) - IRS Stimulus Phase Out

» Filed Under Spending, Taxes

To Stimulate Or Not To Stimulate?

Posted on May 12, 2008

The Happy Rockette mentioned something about our stimulus check that got me thinking. We already have a plan to spend the money on some improvements to the condo. We can enjoy then for the next year our and they will help our house sell when the time comes. I mentioned that the $1500 would look pretty nice in our down payment account, and she hinted that we should use the money for its designed purpose….to stimulate.

She was being somewhat tongue and cheek to counter act my subverting of the plan, but until that moment I hadn’t considered that people might feel obliged to spend money to ‘help’ the economy. In my opinion, the money was ours not the governments and we are free to do whatever we chose with it. This includes paying consumer debt, if we had it, or even throwing it under the mattress. Is it our patriotic duty to spend the money? Will it even make a difference? Thought-provoking questions.

To help answer the question I did a little digging into what kind of effect stimulus payments can have on the economy. Here are a few quotes from the Congressional Budget Office(CBO) on the matter :

“Most studies of purely temporary, one-time changes in taxes have suggested that they have only a moderate effect on household consumption,” the CBO said, noting studies of a rebate issued in 1975 “suggested that only 12% to 24% of the rebate was consumed in the quarter that it was received.”

CBO said though “the experience of the 2001 tax rebate appears to differ from the findings of these earlier studies.” CBO noted the 2001 rebate was part of a broader tax package which lowered tax rates and applied those reductions retroactively. In 2001, most households received rebate checks of either $300 or $600 from late July 2001 to the end of September 2001 during a recession.

“Most analysts agree that the 2001 rebate stimulated the economy,” CBO said, “although there is some debate about the magnitude of the effect.” Households, according to one study, spent between 20% and 40% of their rebate amount in the quarter in which the rebate was received.*

So it looks like there is potential for the stimulus checks to infuse economy with a little money, but there is plenty of debt as to whether our government borrowing money to give to people to spend will do anything to truly stimulate the US economy.

So the question remains stimulate or not to stimulate, what’s your answer?

*Source - The Winners and Losers of the Stimulus Package

What Exactly Is The Stimulus Check? Not A Rebate?

» Filed Under Spending, Taxes

Find Out The Delivery Date Of Your IRS Stimulus Package

Posted on April 16, 2008

The IRS lists the schedule of the stimulus package checks for tax returns processed by April 15th. The dates are determined by the last two digits of you Social Security Number and whether you are using direct deposit or paper check. According to the schedule our $1500 rebate should be direct deposited on May 9th. We plan to comply with the stimulus directive and do a couple of projects around the house.

Click Here for the Stimulus payment schedule.

Update - It looks like the checks will start shipping on Monday the 28th of April, a week earlier than the IRS originally posted according to CNN.

Update 2 - We received our $1500 stimulus payment by direct deposit on May 9th. May 9th was the exact date listed in the 2nd group of direct deposit, so it looks like they are arriving on time.

» Filed Under Taxes

Check The Status Of Your Federal IRS Tax Refund

Posted on April 15, 2008

I thought this was a useful little page provided by the IRS. With you Social Security Number, Tax filing status, and the refund amount you can find out the status of your 2008 Federal Government taxes.

I got this message:

We have received your tax return and it is being processed. Unless we find mistakes or you owe other taxes, you should receive your refund by April 29, 2008.

I will be surprised if the direct deposit takes that long, but I did file closer to the deadline when it is busier.

Click Here to check your status.

» Filed Under Taxes

Professional Tax Preperation Saved Me Over $5,000

Posted on April 7, 2008

Well, the results are in from the CPA vs. Turbo Tax and other DYI tax programs fight. The winner is………quality professional tax preparation by a landslide.

Here is the break down:

My CPA isn’t responsible for all of the savings, but the service was definitely worth the cost. First, we tuck away 40% of The Happy Rockette’s paycheck, so we knew we had more than enough for our 2007 taxes. We were expecting a bill of around $4,000 dollars between federal and state.

One big difference was that we made about $6,000 less than 2006. I didn’t work any overtime and had $3,000 of gambling winnings to claim in 2006. We also donated $1,500 more in 2007. That accounts for some of the shift, but almost all of the rest came from the great tax advice.

I was going to do my own taxes to compare, but looking through the return I can see where most of the savings and deductions came from. The highlights are:

$750 dollars in mileage and expenses for the Rockette’s consulting that I wouldn’t have filed.
$1,000 of extra itemized deductions.
Plethora of savings for The Happy Rock including a percentage of my home depreciation and utility costs, equipment depreciation, and expenses that I wouldn’t have known to claim.
Proper handling of child care expenses.

That is a great list for the measly cost of $400, but I now also know what receipts and expenses that I should track to claim in 2008 which will save me thousands going forward. The only part I regret is that I didn’t pay for professional services years earlier! More money back in my pocket with a lot less stress, you can’t beat that.

» Filed Under Money Savers, Taxes

The Happy Rock Spends The Big Money For Tax Prepation

Posted on March 15, 2008

I mentioned previously how doing my own taxes last year almost cost me $350 in penalties and interest. Luckily I was able to get that down to around $90. This year I decided to shell out the big bucks and buy top notch tax advice and preparation, even though it goes against my frugal disposition.

Why would I do it then? Because I think it will more than pay for itself. It is one of those short term financial pain for long term benefits. FMF at Free Money Finance was the person that really got me thinking about using a CPA. Below is a list that expands on some of his great reasoning:

Time is Money. It would take me probably 10-30 hours to really do my taxes well and do enough research to feel like I wasn’t missing anything big. If my time was worth $20 an hour, that would about equal the price of a good CPA.

Our Taxes Are Somewhat Complicated. Some of the abnormal items are a self employed spouse, home based business(The Happy Rock), and an in-home babysitter(Nanny Tax). Professional advice on just those three items will more than pay for the increased fee.

Tax Knowledge Has Long Term Benefits. Any knowledge gained now will save us money on taxes for years to come.

“Peace of Mind”. No stress!!! No fear of audits. I won’t make common mistakes. Even more than lack of problems and stress, if I connect with a high quality professional I can be assured to get as much of my money back from the government as possible.

With that said, connecting with a high quality professional is the key to most of the benefits. I tried a tax service, Liberty Tax, which is just like H&R Block and other outfits a few year ago and felt like it was a total waste of money. Basically I was just paying for someone to enter my taxes, not for any real tax advice.

So, how did I connect with a high quality CPA? There happened to be a regular commenter on The Happy Rock named Thecpa. I was able to get a very good recommendations from a co-worker and made the leap last week. Thecpa works for Zarin and Associates in Pennsville, NJ and the cost of the accounting advice will be around $400. From just two emails I am confident that I will save more than I will pay just this year. A good accountant only needed to find an extra $1000 or so in deductions to directly make the fees worth it. For me, a properly done home office deduction were I can write off a percentage of my utilities and depreciate my house will be a huge tax break for years to come.

I may even get spunky and try to do my own taxes online and see what the difference is.

» Filed Under Money Savers, Taxes