Readers stumped by tax rebate riddles

John W. Schoen Senior producer • Profile • E-mail

As readers sit down to the annual brain-teaser of filing their income tax returns, this year offers a new enigma. Will I get one of these tax rebates from the government? Last week's column on the subject touched off a flood of fresh questions.

Regarding the stimulus plan, how about those of us who "overpaid" and received a return from the IRS? We have two kids but did not actually owe the IRS anything, in fact, we overpaid and received money back. Will we benefit from this?
— Zoe, Sacramento, Calif.

Yes, as long as qualify under the income guidelines (see last week's column), you'll get a rebate.

Many readers are confusing rebates, refunds and returns. Your return is the set of forms you fill out and file with the IRS detailing your various sources of income, along with any deductions and tax credits. Your refund is any money the IRS gives you back every year if you had too much money withheld from your paycheck during 2007, or any other reason that reduced the amount of taxes that you owe below what you've already paid. Your rebate is a one-time cut in the amount of taxes you owe — the size of which depends on your income, martial status and the number of children you claim as dependents.

This is technically a rebate for your 2008 taxes, but the checks are going out this year based on your 2007 return. If you don’t qualify in 2007, and you do qualify in 2008, you’ll get a check next year.

Since the tax rebates are actually rebates against 2008 taxes and not 2007, will they decrease the size of the refund we will get next year? If we would normally get a $500 refund, but receive a $1200 rebate check, will we end up owing $700 to the IRS next year? Or, is this really free money?
— Rich W., Parma, Ohio

It’s free money. You won’t have to pay taxes on your 2008 return on any rebate you receive and you won’t have to give it back next year. If you’re due a $500 refund from paying too much withholding tax in 2007, you’ll get it all back — plus the $1200 check you'll get if you and your wife don’t make more than $150,000 in adjusted gross income. Any refund you get in 2009  will be based solely on how much you overpaid the government for income earned in 2008.

If a person passes away in Sept. of 2007 will they still get the extra check?
— David T., Springhill, Fla. 

Technically, no. The IRS will not issue a check to someone who is deceased. The rebate will be paid to the estate of the person who died, to be distributed according to the terms of that person’s will.

I moved since filing 2007 taxes. Do I need to notify someone to receive my rebate check?
— Jason, Houston, Tex.

Yes, the IRS will mail the check to the address provided on your latest return. If you move after filing your 2007 return, you’ll need to provide a forwarding address. You can do this at the post office, or you can notify the IRS directly. Go to the IRS Web site and download Form 8822, fill it out and send it in.

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