How will rebate be handled on 2008 Return?

[Zee]

Here's my understanding:

The 2008 tax rate will be cut to zero from 10% retroactive to Jan 1st, 2008. It’s already early February, 2008. As such, instead of changing the withholding tax tables, advance rebate checks will be issued for the tax reduction you would have received each paycheck since Jan 1st.

Does anyone disagree?

[erchess]

I see no basis for discussion

until a bill clears both houses of congress and then either is signed into law by the President or Vetoed by the President and his Veto overturned. I am sure that you are right about some version of the law. But things keep changing. I have written to my Representative and both Senators urging that whatever is done NOT be reportable on any future tax return, but I have no way of knowing whether I will get what I want.

[Zee]

until a bill clears both houses of congress and then either is signed into law by the President or Vetoed by the President and his Veto overturned. I am sure that you are right about some version of the law. But things keep changing. I have written to my Representative and both Senators urging that whatever is done NOT be reportable on any future tax return, but I have no way of knowing whether I will get what I want.

Today's news, would indicate it's a done deal. The only thing remaining is the President's signature and that's virtually certain. Of course, Bush may not sign...but, that isn't a basis to stifle discussion. I'm trying to find an easy way to describe why a "rebate" isn't a "freebie" to many.

[Larmil]

Today's news, would indicate it's a done deal. The only thing remaining is the President's signature and that's virtually certain. Of course, Bush may not sign...but, that isn't a basis to stifle discussion.

Mr. Bush has already said that he would sign. He is probably picking to right moment to maximize media coverage.

[jimmcg]

I'm trying to find an easy way to describe why a "rebate" isn't a "freebie" to many.[/QUOTE]

When it is an advance on your 2008 refund amount.

[gkaiseril]

Last Time

The last time this was done, the rebate was added back to the tax liability like the Advance EIC. This is just an advance on the possible 2008 tax refund.

[JON]

I was under the impression

this is not an advance on anything for 2008, but a rebate from some previous year. How would anyone who received only $3000 of social security have any filing requirement in '08 for their rebate of $300. The previous was an advance on credits-children lower tax brackets , whatever that were going to be taken for the first time. I do not think these rebates will appear anyplace on the '08 return.

The better question is do you have to file now when you did not file before to let them know you qualify for the rebate...

[Zee]

this is not an advance on anything for 2008, but a rebate from some previous year. How would anyone who received only $3000 of social security have any filing requirement in '08 for their rebate of $300. The previous was an advance on credits-children lower tax brackets , whatever that were going to be taken for the first time. I do not think these rebates will appear anyplace on the '08 return.

The better question is do you have to file now when you did not file before to let them know you qualify for the rebate...

Are you sure about that? Or, are you thinking about the 2003 rebate of child tax credits?

The rebate awaiting the President's signature is similar to the 2001 rebate which cut taxes on the first $6000 of income for singles and $12000 for couples from 15% to 10%. Thus, the summer 2001 checks weren't a rebate of previous April's taxes, but an advance on refunds the taxpayer would receive in 2002. Like the 2001 rebate, it's too late to send out new tax tables with the 2007 1040 forms, or to change withholding tables. As such, the rebate is really an advance of the 2008 refund resulting from the tax rate reduction.

Or, perhaps I'm missing something...

As preparer's, we will be getting phone calls. I hope I can explain this correctly.

[Jesse]

After answering the phone all morning about how much am I gonna get!!!, I think I will look up my state senator's phone number, give it to the clients and tell them to ask him. I am so far behind and now this.

I think this is an excellent idea.

[JohnH]

The correct explanation

Here's how I've explained it to the clients who have asked me about it.

"After dragging their feet for 2 weeks, Congress finally got around to sending the legislation to President Bush today, but he hasn't yet signed anything into law. Once it becomes law, the IRS will put out clear info on how it works within a few days. Until then, anything I say is just speculation, and it's no more or less reliable than the stuff being printed in the newspapers or blabbered on TV."

[Fuzzy Faced Leader]

It takes the IRS several weeks to do anything after Congress passes it. Reference the AMT patch. Thus I would modify your statement to "several weeks". Especially since it is now February, and the rebates aren't coming out until May. My guess is it will take the IRS that long to figure out how to make the rebates taxable, or includable in the 2008 tax returns.

[JohnH]

Maybe

Could be several weeks, but I'm thinking the IRS will be under incredible political pressure to get something definitive on the street soon. The politicians want something to crow about, and they can't have the IRS undermining their bragging rights. This thing is primarily about buying votes - any real economic stimulus that happens to result is just a nice side effect.

I'm still leaning in the direction that it will be neither taxable income or a reduction of next year's withholding. Maybe there will be an adjustment of some sort on the 2008 return to enable anyone who missed out but was eligible for the rebate to get it, but that remains to be seen. (The bill says it all has to be paid by Dec 31, 2008)

Whatever the case, I'm not sharing any speculation we've engaged in on this forum with any of my clients, because the truth is we just don't know.

[ChEAr$]

In any case

since the whole "rebate" thing is predicated on a reduction in the lowest 10% bracket,
it will not be includible as income later.

Except of course to Alabama!

[KJ Judd]

I read somewhere that it is a "rebate". If you meet the qualifications based on your 2007 tax return you get the rebate. Then when you file 2008 if you do a reconciliation. If you qualified for the "rebate" before, end of story. There is no accounting for it or paying a portion back.

The reconciliation just picks up any taxpayers who did not qualify for the "rebate" based on their 2007 taxes but would based on their 2008 taxes. And if you are in this second situation it's reflected as a credit on your 2008 tax return.

The IRS will not issue any "rebate" checks after Jan. 2009 to (attempt) to prevent double dipping.

[mwarney]

Don't know if anyone has posted this yet:

http://www3.capwiz.com/c-span/webreturn/?url=http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.5140: