Tax Facts About 2008 Stimulus Payment

Facts About the 2008 Stimulus Payments

2008/04/07 00:00:00 Information from MOAA.

The Economic Stimulus Payment is an additional payment from the Internal Revenue Service (IRS) to help kick start the economy. From the questions we have received here at MOAA, there is a bit of confusion about how the program works. Especially confusing is the part that deals with tax-free income and filing a return when one usually is not required to do so.

In a nutshell, the amount of your stimulus payment depends on your filing status and how much income tax you pay, as long as your income is under the income limits.

* For single filers, the following applies:

• Single filers can receive up to $600.

• Those with an Adjusted Gross Incomes (AGIs) above $75,000 get reduced benefits.

• At AGIs of $87,000 and above, there is no payment.

* The following applies to married filers:

• Married filers (no children) can receive up to $1200.

• Parents can get an additional $300 per child under age 17.

• AGIs above $150,000 receive reduced payments.

• At AGIs of $174,000 and above, there is no payment.

It is not possible to use your tax-free income to get a larger stimulus payment. To qualify for a stimulus payment, you must have all of the following:

• $3,000 in annual income (taxable or tax-free income);

• a Social Security number; and file income taxes for 2007.

Once you meet these basic criteria, there are two types of filers for the payment: those with taxable income who pay income taxes; and those who don’t normally file taxes due to tax-free income.

First, taxable income filers should file taxes as they normally would. Nothing else needs to be done. If you also have tax-free income, do not add it to your return unless you need to use the tax-free income to reach the $3,000 minimum qualifying income requirement. Your stimulus payment is based on your actual tax paid. For married filing jointly (no children), if you pay less than $600 in taxes, you will get $600. If you pay between $600 and $1,200 in taxes, you’ll get a payment equal to the amount of you tax paid. If you pay over $1,200 in taxes, you’ll get $1,200. Do not add your tax-free compensation to the taxable income on your return. Tax-free income does not add to your tax burden. For single filers, the same process applies to you, but payments will range between $300 and $600.

Second, if all or most of your income is tax-free, and you do not normally file income taxes, you must file this year to get the stimulus payment. The instructions for filing are at http://www.irs.gov/newsroom/article/0,,id=179203,00.html. You may use tax-free income to qualify for only the $3,000 minimum income requirement to receive the minimum stimulus payment. Filers in this category will receive the smallest payments of $300 for individuals and $600 for married filers.

Do not attempt to combine taxable and tax-free income to receive a larger payment. The stimulus payment is not based on the amount of your income, taxable or tax-free, so there is no benefit gained trying to enhance your income amount. Tax-free income does not add to your tax liability.

Finally, recognize the stimulus payment is based on the amount of tax you pay. For more information, visit the IRS’ Web site at: http://www.irs.gov/newsroom/article/0,,id=177937,00.html.