Money Blue Book

Tax Cuts, Social Spending, and New Jobs – But What About Stimulus Checks?

A second economic stimulus package for 2009 is on the way and from the looks of things in the news, it appears newly minted President Barack H. Obama and his Democrat controlled House of Representatives and U.S. Senate are determined to ram the lucrative spending proposals through the legislative meat grinder no matter what, much to the chagrin of skeptical and deficit-weary Congressional Republicans.

As Congress debates the wisdom and intricate details of the current version of the 2009 economic stimulus package, it’s clear that something needs to be done very soon to jumpstart and save our suffering economy before we spiral into a full blown economic depression. The unemployment rate is rising fast and everywhere you turn, there seems to be a never ending stream of unemployment and layoff news being announced everyday. The stock market has already shed more than half of its value since its peak in 2007, and billions to trillions of dollars worth of wealth have already been eliminated from the economy. Major banks and financial giants like Citibank, Bank of America, and JP Morgan Chase, once the financial pillars of our economy and the lifeblood of our credit industry, are now clinging onto U.S. government bailout money for dear life – hoping to still be in business at the end of every quarter.

With its almost limitless resources, it’s clear the federal government must intervene somehow and put this broken economy and financial system back on track to prosperity. But the question is – what should be the government’s role in all of this? More specially, what method should the government take to effectively jump start the economy to life again and ease the suffering on Main Street and Wall Street? Should the 2nd economic stimulus package continue to focus directly on sparking consumer spending by featuring a second round of free stimulus checks to consumers – perhaps for amounts much higher than the previous 2008 economic stimulus checks? Or should the plan this time around focus more on longer term indirect measures like job creation, infrastructure investment, and tax credits?

Current 2009 Economic Stimulus Package Focuses Less On Stimulus Checks – And More On Job Creation, Infrastructure Projects, and Tax Cuts

Before Barack Obama was elected president and during his 2008 Presidential election campaign, he supported implementing additional economic stimulus measures in 2009 – and even whispered at the rumored possibility of a second round of stimulus checks for taxpaying consumers in 2009 before tax day.

Whether a second stimulus check was a real possibility or not, the mere mention of a second round of stimulus payments and the prospect of getting more free government money certainly made my greedy ears perk up, but much of my optimism and enthusiasm were quickly dashed when Obama finally came into power. Almost immediately, he signaled a different stimulus proposal shift that favored a more multi-pronged approach of using tax cuts, tax credits, and pet projects, rather than relying on the 2008 economic stimulus check tactics of his predecessor, George W. Bush. Instead of just distributing free bailout money to the masses and hoping the funds will naturally trigger a huge surge in consumer spending activity to put the economy back on its feet again, Obama’s stimulus package focuses more on middle class tax cuts and massive increases in government spending to fund various infrastructure investments, green energy projects, financial aid to states, and social education initiatives – designed to create jobs and put people back to work.

The current 2nd economic stimulus plan laid down by President Obama for 2009 is a whopping, super-sized $825 billion economic rescue package containing staggering spending initiatives and ambitious tax cuts, and sprinkled with dozens of pork-based proposals and suspect social initiatives within hundreds of pages of legislation. The current package contains $300 billion worth of aggressive construction projects designed to improve the country’s  infrastructure and create millions of new artificially generated jobs in areas like health care, renewable green energy, school upgrades and repairs, and transportation related improvements. The package also contains about $200 billion worth of state social assistance provisions designed to help keep state sponsored health and unemployment programs well funded – to offer a measure of cushion for those people who have been recently laid off due to the economic down turn. Along with the state assistance portion are other safety net type provisions to help fund and keep afloat local food stamp programs, food banks, state sponsored health care, and governmental health insurance plans for those suddenly unemployed.

The other primary feature of the current Obama economic stimulus plan is the series of tax cuts and tax credits offered to qualifying individuals and small businesses. Under the tax cut portion of the stimulus deal, small businesses suffering losses because of the economic downturn and recession would receive more favorable tax loss write off terms.

For individuals, the current 2009 economic stimulus package offers pretty generous tax cutting proposals. The plan highly favors low and middle-income working families since the idea is that these income groups are more likely to spend and invest their tax savings rather than save the money. In terms of stimulating the economy, increased consumer spending is good, and consumer saving is bad. Nicknamed the “Make Work Pay Credit” by President Obama, the proposed tax credit is supposed to reach close to 95% of workers, and benefit even working tax filers without any tax liability – typically very low income workers. Here is a basic overview of the stimulus plan’s Make Work Pay Credit:

• Middle Class Tax Credit: Under the plan, there would be a tax cut amounting to $500 a year for individuals, and $1,000 for couples. The economic stimulus would be issued in the form of a tax credit, and would be limited to those making $75,000 or less ($150,000 or less for married workers filing joint tax returns).
• Low Income Tax Credit: For low income taxpayers, there would be an increase and expansion of the Earned Income Tax Credit to provide a refundable tax credit for low income assistance. The expansion would affect even working tax filers without any actual net tax liability – typically very low-income workers – and allow them to potentially qualify for free stimulus tax refund credits.
• Child Tax Credit: For those who have children, a temporary increase in the child tax credit would result in larger tax refunds.

Should The 2009 Economic Stimulus Plan Be Re-Written Or Re-Packaged To Contain Major Provisions For A Second Economic Stimulus Check?

It’s too bad the eventual 2009 stimulus plan probably won’t contain another round of hefty stimulus check payments to ordinary consumers like the ones that were dished out last year. While the 2008 stimulus tax rebate wasn’t much (only a few hundred dollars in my case), some additional government handouts in higher dollar denominations would still have been greatly appreciated by individuals like myself and put to good use. Plus, as an American consumer who embraces the virtues of capitalism, I feel I would have made a better decision for myself as to how best spend my portion of the stimulus money pursuant to what’s in my own best capitalist self interest.

Overall, I think President Obama’s administration is probably right in its revised efforts to focus more on job creation, offering greater tax cuts, and enhancing safety net protections to help suffering Americans survive the economic downturn for the long term. Offering greater financial assistance to struggling state unemployment programs (many on them on the verge of running out of funds), and stimulating growth with more job building projects is a proven way to stabilize the markets and improve consumer sentiment. However, I’m still a bit disappointed that the President and Congress have not explored the prospect of an enhanced second stimulus check further.

At least for now, President Obama’s administration seems to have given up on the idea of using government stimulus checks en masse again to jump start the economy. Instead, Obama’s advisers have indicated that they would prefer searching for viable ways to get government stimulus money into the hands of American taxpayers quickly that would not require or duplicate the tax rebate checks of last year. Apparently the $150 billion spent in 2008 in the form of stimulus payments to consumers proved to be quite an economic failure and pointless exercise of futility in terms of actually stimulating the economy to any extended degree. But perhaps the reason it didn’t work properly the first time around was because too little money was given out to substantially change consumer spending habits to forcibly inject money back into the economy again (simply compare the $150 billion spent last year to the $800 billion-plus worth of spending being proposed for 2009).

Perhaps The Problem With The First Stimulus Checks In 2008 Was That They Were Too Little To Make Much Of An Impact

I have mixed feelings about the prospect of yet another around of direct stimulus checks to consumers. On one hand, I understand that there are many struggling American families getting hammered by higher living  costs, and suffering from the ills of unemployment and layoffs. However, I’m not entirely convinced that the idea of handing out free money to families will really solve all of our economic woes and jump start the economy at its core. But yet I still wonder if perhaps we gave up on the idea of stimulus checks too early and that maybe, the concept is still workable. Maybe the amounts issued in 2008 were simply to small to change anyone’s spending habits as initially intended – after all, only about $150 billion was spent in 2008, when the current 2009 economic stimulus proposal’s already ballooned to a whopping $850 billion.

I know when I received my tax rebate stimulus check in early 2008, the check only amounted to a few hundred paltry dollars – not really enough for me to go on a greedy spending spree. So instead of spending it and doing my part to stimulate the economy, I ended up doing what most people probably ended up doing with their tax rebate check – putting the money in a bank and depositing it into a high yield savings account. Of course, my plans for the money would likely have been very different if the amount wasn’t something low like $300, $600, or $1,200, but rather something as high as $10,000. If the stimulus check issued to me was indeed worth upwards of $10,000, I would very likely have saved a small portion of it but ended up plowing a sizable portion back into the economy by spending it on major expenditures like a new wide screen plasma TV set, new home appliances, or even a new car.

What If The Entire Economic Stimulus Bailout Package Went Towards 2nd Stimulus Check Payments? Would This Actually Stimulate The Economy?

Almost all polls among ordinary American consumers show overwhelming support for a second stimulus rebate check. After all, who would really oppose it? Who would be opposed to receiving free stimulus check money. Think the prospect of getting a second stimulus check worth as high as $10,000 as a consumer bailout is impossible? Well it’s probably unlikely, but it’s not out of the realm of financial or budgetary possibility, at least based on the fiscal numbers alone.

On CNN Money, a very interesting question was proposed in regards to the bank bailout and economic stimulus packages. If instead of bailing out these credit crisis-stricken banks (who probably deserve their fates due to the risky mortgage bets they greedily placed into subprime loans), we just gave all of the bailout money to taxpayers in the form of a massive consumer cash stimulus. How much would we each get if the entire current economic stimulus proposals were issued out to consumers as a second round of stimulus check payments? The second important question to ask is – would this actually stimulate the economy for the necessary extended period of time to get it going again?

To arrive at the figure, CNN Money took the total amount of the bank bailout package of $700 billion and added that to the proposed 2009 economic stimulus spending estimation at the time of $819 billion – resulting in a total bailout package of $1.519 trillion (that is quite a staggering figure). Dividing that number by 156.3 million, the total number of U.S. workers who filed federal income tax returns in 2008, that number equaled $9,718.49 per U.S. taxpayer, or roughly the equivalent of a juicy $10,000 cash bailout payment for each qualified tax payer. Now that’s stimulus with oomph! With $10,000 in our pockets in the form of instant windfall economic stimulus checks, it’s very likely that the tremendously high amount would be sufficient to incite a major change in spending activity than a measly $600 check ever could.  People would probably go out and actually start stimulating the economy by buying cars, purchasing TV’s, paying for college studies, and going on vacations.

As a dose of devil’s advocate inspired reality though, while it’s very possible that $10,000 checks in every working taxpayer’s hands would probably send the economy skyrocketing, it’s also possible the growth could be short lived and not actually get to the true root of our current economic problems. The massive surge in consumer spending probably won’t do much to solve the lingering fundamental issues surrounding our current credit crisis, which centers around a failed banking system and a failed home mortgage lending market. But then if repairing the banks and injecting confidence back into our home mortgage and credit lending markets are our primary objectives – I’m not sure the current economic stimulus proposals by President Obama, which are focused more on tax cuts and job creation and most prominently, aggressive social spending programs – will actually accomplish those goals. At least for stimulus checks, they could be able to help alleviate some of the immediate economic suffering being felt by ordinary consumers – many of whom are fighting to stay alive, with a great deal currently resorting to desperate emergency fund measures like 0% credit card offers, balance transfers, and risky high interest payday loans.

I’m curious as to everyone’s opinion on the wisdom of a second stimulus check (if it ever happened). What’s your take? Would substantially higher stimulus checks of $1,000, or possibly even as high as $10,000, actually encourage you to spend the money (thereby stimulating the economy) instead of merely saving the amount or using it to pay down debt? How would your decision compare to how you actually spent your previous 2008 tax rebate stimulus check?

After months of waiting and checking my mail box regularly like a little kid waiting for his video game to arrive, I was finally relieved to discover a little envelope from the United States Treasury yesterday – my long awaited 2008 Economic Stimulus Payment check had finally arrived! Cha-ching (punctuated with a few obligatory fist pumping motions).

Actually, about a week ago I had already been given written notice that the check was on its way. I received one of those pointless waste of paper junk mail letters from the Internal Revenue Service (IRS) letting me know that I was entitled to an economic stimulus payment check as provided by the Economic Stimulus Act of 2008, and to expect its arrival in a week or so. The letter also provided a simple breakdown of how the federal government calculated my small time stimulus payment.

But what was the point of sending this predecessor letter out to let me know this? Why is the IRS and federal government so oblivious and wasteful when it comes to wasting millions of dollars on paper and delivery costs to send out these pointless letters? Why not just combine the calculation breakdown letter with the actual stimulus rebate check that I received yesterday rather than sending them separately on different weeks? The financial savings for the federal government could easily have been several million dollars. Especially since we are now in an economic recession and the government keeps griping and raising issues about needing to balance the budget, and even some of the presidential candidates like Barack Obama keeps talking about raising taxes against those with higher incomes to pay for more federal government programs, why not practice some fiscal sense now by adopting real cost cutting techniques? The government’s habitual wasteful spending activities truly baffles me sometimes.

How My Economic Stimulus Tax Rebate Was Calculated

While I had hoped to receive my economic stimulus rebate via direct deposit, because I filed my 2007 tax return through TurboTax and actually owed a sizable amount of taxes, I was not able to provide my bank account routing numbers on my tax return for direct deposit purposes. Thus I was one of many who had to wait for my economic stimulus check to be mailed via the postal service.

Taking a look at my rebate, here is how my actual stimulus payment was broken down, in case you’re wondering. Because my adjusted gross income on my reported 2007 federal income tax return was above $75,000, the IRS reduced my stimulus payment by 5% of the amount of my adjusted gross income exceeding $75,000. As such, with my single filing status starting qualification amount of $600 increased by $0 for my lack of qualifying children, but reduced by $230.25 for the adjusted gross income limitation, my final calculated stimulus payment turned out to be only $369.75. It’s not a whole lot, especially since the cost of living in my D.C./Maryland suburban neighborhood is pretty high, but I suppose every little bit helps me pay the bills in the grand scheme of things.

How I Plan To Spend My Economic Stimulus Check, and Its Impact On My Future 2008 Tax Return

I’m obviously elated to receive my tax rebate check finally after all these months, but after looking at the relatively small amount, it sort of leaves me wondering, how is this small amount of money really supposed to stimulate the economy to any significant degree? While the check is certainly free windfall money in the sense that I wasn’t really expecting it or planning for it until recently, the amount isn’t really large enough for it to be good for much.

I considered several financially smart as well as a few fun but reckless ways to spend my tax rebate, now that I have it in my hand. Here are the choices and possible options I came up with:

1. Use the economic stimulus payment to help pay my rent – The downside is that with a pricey monthly rental obligation of $1,425.00, this small economic stimulus payment isn’t likely to make much of a dent in my case.
2. Deposit the small stimulus rebate into my high APY savings account to earn interest and help build up my backup emergency fund – I usually try to keep at least enough liquid cash in my savings account to last 6 months. I advocate more emergency fund savings than most, but I think this offers greater peace of mind. In this recession, you never know what unfortunate events may strike when you least expect it – everything from out of the blue vehicle repair charges to sudden unemployment necessitating the need to file for unemployment insurance benefits.
3. Save the stimulus rebate for retirement and contribute the amount towards my Roth IRA retirement fund. This is a good way to plan for the future. Great for you, but not so good for the economy (at least for the present time).
4. Pay off debt – While this sounds like a logical choice, other than my usual monthly revolving credit cards bills that I always pay off in full, my 0% APR balance transfer credit card arbitrage funds, and my very low interest student loans, I don’t have significant debt that demands my immediate attention to speak of. I think I’ve done a pretty good job of managing debt.
5. Spend the money and actually help directly stimulate the economy by injecting it back into the stream of commerce – Possibilities include using it for discretionary entertainment reasons like spending it on expensive movie tickets or even just using the amount to pay for necessary driving expenses brought about by spiraling high gas prices.

After much thought, I decided to deposit the amount into my high yield savings account like a good grasshopper (or was it the ant) and save for a rainy day. Why change my frugal savings minded personality just because I came upon some windfall money? I’m the type of person who would probably still drive around in a rain storm for a free car wash to save some money as a force of habit even after winning a lottery for millions.

As for the taxation aspects of the economic stimulus payment, due to the terms and nature of the Economic Stimulus Package, recipients of the tax rebate such as myself will not have to report the amount of our stimulus payments as taxable income on our 2008 federal income tax returns. The amount is indeed free money and not something we will have to pay back or pay taxes on. Furthermore, if any recipient also received any other federal benefits or federally financed benefits, those benefits generally will not be affected by any stimulus payment received as well.

Where’s My Economic Stimulus Payment? Ask The Almighty IRS

For those of you who are still waiting for your stimulus tax rebates with bated breath, you should utilize this handy IRS stimulus rebate tool to locate the status of your economic stimulus payment. It should be able to answer your most pressing tax rebate question. To use the online tool and verify your identity, you’ll need to provide your social security number, your filing status, and the total number of your exemptions.

If you still are not able to obtain a satisfactory answer, you may want to visit your local Taxpayer Assistance Center for help or call the IRS via the Rebate Hotline at 1-866-234-2942 for updates.

Back when I was in college, I knew absolutely nothing about filing my taxes. Yes, I was a college finance major at the time, but I don’t recall learning anything practical about taxes, deductions, or income withholding in any of my classes – at least not anything involving the actual process of filing one’s tax return. At the time I had a part time job working at a school computer lab making some extra money. Every week I received a pay check but I never paid it much attention. I barely knew what the numbers meant – wages and FICA, they were all the same to me – all I knew was that the government was taking a large chunk of my meager pay check every week, leaving me with only peanuts. Since I made so little at the time, only a few thousand dollars for two semesters of work, when it came time to file my taxes, I decided to try doing it myself. My parents weren’t much help since they were living overseas and had expressed their wish for me to become more financially independent and self reliant.

Sometimes You Make Mistakes in Life – And Taxes Are More Prone To Errors Than Anything Else

Despite knowing next to nothing about taxes, I still somehow managed to file my income tax by following the Internal Revenue Service (IRS) instructions, albeit in bumbling fashion. This was before I started using free tax preparation solutions or utilizing electronic do-it-yourself tax preparation programs like TurboTax or H&R Block’s Tax Cut (read my detailed TurboTax TaxCut review). Even though my income was low enough to file a simple 1040EZ with only one set of W-2’s, as a tax newbie, the first year’s filing experience still took hours and hours. The following year I had significant capital losses due to the dot-com stock market crash of 2001 so I had to file the regular Form 1040 return. The process took forever but somehow after many hours of filling in stock data, I successfully completed my tax filing (or so I thought at the time). Unbeknownst to me at the time, but I had forgotten to fill in my federal income tax withholding numbers for two straight years.

It wasn’t until I started law school during the third year that I decided to review my old tax forms. During that time I was enrolled in my school’s low income taxpayer clinic where I was assigned to help low income clients fill out their tax returns and represent their interests before the IRS. In the process I became more educated about taxes. One day on a hunch, I decided to take a look at my old tax returns and was stunned at what I discovered. Apparently I had been filing my taxes incorrectly for the past two out of three years. The reason none of my returns had triggered an IRS audit or unpaid tax liability investigation was because I never owed any taxes in each of those years due to my low $3,200 annual income. However, I had completely neglected to include any information about federal income tax withholding on my submissions. After crunching a few numbers, I realized I was entitled to tax refunds of approximately $340 for each of those two past years, for a total of almost $700. Almost three years had past at that point, but there was still time to correct the tax overpayment mistakes and claim my tax refund – I could file a Form 1040X Amended Federal Income Tax Return.

Tax Mistakes And Erroneous Filings Should Be Amended Upon Discovery

The IRS has a complex system of computers that will detect most simple mathematical calculation mistakes that result only in a few dollars here and there. However, more significant mistakes like the underreporting of certain Form 1099 income sources or failing to report self employment income may come back to bite you in the butt if you don’t report them eventually. The IRS will impose stiff penalties and interest on taxpayers for such tax shortfall violations. I don’t recommend trying to duck the obligation or hoping the danger will pass. If you catch the tax mistake before the IRS does, you may be able to avoid and avert a substantial amount of IRS tax penalties. Yes you may need to pay some interest for making the mistake in the first place and not paying on time, but the consequences for not catching it until much later can be disastrous. IRS unpaid tax penalties are ridiculously harsh.

Keep in mind that not all tax filing mistakes have negative consequences. Oftentimes they are detrimental only because they deprive the taxpayer of legitimate refunds due to overpayment of tax, like in the situation I described above. Sometimes for example, the taxpayer overlooked a more beneficial tax filing status such as head of household but did not realize that until later. Remember, so long as you are not engaging in illegal tax evasion, there is nothing wrong with finding legal methods of reducing your tax liability to boost your take home refund.

The Process Of Filing A 1040X Amended Return To Correct A Past Tax Return Mistake

The current time limit for filing an amendment to correct a past tax return is generally 3 years. So long as you are within 3 years of the filing date of the erroneous tax return, you may file a Form 1040X to fix it and reap whatever tax benefits offered. Of course, if that means you have to pay more in taxes, that’s part of the trade off for getting it right. You may draw some unwanted attention and scrutiny of your past tax returns, but keep in mind, the IRS is likely to catch the mistake eventually so it’s usually best to keep your returns currently and historically accurate. You never want to live your life in perpetual and continuous fear of a full blown IRS audit.

However, for those who failed to pay all of the taxes owed during the past original years filed, your time limit to amend the mistake is shortened to 2 years. From the date that you finally paid the tax, you will have only 2 years to correct the mistake, instead of the usual 3. But if your 2 year deadline arrives later than the standard 3 year deadline, you are permitted to file your 1040X at the later date.

The instructions for filing 1040X are fairly straight forward. Currently, taxpayers who want to file their 1040X Amended Returns online are out of luck since the IRS is not presently accepting 1040X Forms electronically. I’m sure they will bumble their way around to setting that option up eventually but for right now, amended 1040X filers must mail and submit them in paper form. The form itself is rather self explanatory. It does require that you locate archived copies of your past tax returns so you can transfer the original information onto the claim form. You have to list the information you originally reported, and include what your corrected numbers are. Finally you have to state brief reasons why you are now making the corrections. In my case, the reasons were simply that I made a few tax preparation errors by not including tax withholding information.

When filing your 1040X, remember to submit and file a separate 1040X Form for each year you are amending, and don’t forget to sign each one. Also, be sure to write down the year of the tax return that you wish to amend at the top of the 1040X Form. This is such a common mistake to make. After all, you don’t want to end up having to submit yet another 1040X to amend your incorrectly filed 1040X do you?

It’s that time of the year again and it’s looming large. April 15, tax day – the day we take our hard earned money and pay our annual emperor’s tribute to Uncle Sam and the United States government. For most working people, April 15 day is the deadline for filing our tax returns to claim the tax refunds that were withheld by the Internal Revenue Service (IRS) in excess for most of the year. This year is extra special since there’s an extra bonus and incentive twist waiting for us. This year we have the 2008 economic stimulus stimulus rebate qualification to contend with.

The IRS has already stated that taxpayers who wish to receive their tax rebate payment in timely accordance with the official tax rebate payment schedule must file by April 15, 2008. Currently, the economic stimulus rebate will be issued according to the last two digits of the primary tax filer’s Social Security Number. People who chose to receive their tax refunds via direct deposit will enjoy speedy priority and will be among the first to receive the payments starting May 2 and lasting until May 16. For those of you who chose the slower paper check option, your stimulus payment check won’t get to you until the direct deposit crowd have gotten theirs. Paper checks won’t be sent out until May 16, and lasting all the way into July 11.

How Do I Request An Extension To File My Federal Income Tax Return?

If for whatever reason you cannot file your 2007 return by the due date, you may be able to get an automatic 6 month extension of time to file. The official directions to filing for a tax return extension and information about related late filing penalties are located on the IRS website. Essentially, you must file Form 4868 Application For Automatic Extension Of Time To File U.S. Income Tax Return by the tax filing due date, usually April 15. A granted extension will allow you to file your income tax return by the later date of October 15, 2008. Note that special rules may apply if you are living outside the United States, or out of the country when the filing extension expires, or if you are serving in a combat zone such as Iraq or Afghanistan. Be sure to file on time or request a proper time extension. If you don’t, the IRS will slap interest and penalties on your unpaid tax liability.

However, you must be aware that any grant of extension of time to file your return does not grant you any extension of time to pay your tax liability. This means even if you are permitted to file past April 15, 2008, you must still pay your estimated tax liability by that date. Those who owe taxes must make reasonable payment when they file the extension either by mailing a check or by making an electronic money transfer. If you don’t make payment by April 15, beware the mighty wrath of the IRS. If you do not submit payment for at least 90% of your total tax bill, factoring all prior tax withholdings, estimated payments, and additional payments, the IRS will hit you with an interest and penalty stick – and it’s a big one. You will be charged late payment interest and late payment penalties for each month the unpaid tax liability remains outstanding, up to a whopping 25% penalty of the total unpaid tax liability!

For those of you who reasonably anticipate a tax refund, you don’t have to worry about penalties, although by dragging it out you are essentially giving the IRS an interest free loan.

When Will Those Who Request An Income Tax Filing Extension Receive Their Tax Rebate Checks?

Unlike most of the usual governmental knuckle and foot dragging we usually see, the IRS is actually under substantial pressure and governmental poking to get these tax rebate direct deposits and payment checks out as soon as possible. The whole point of the rebate is to get them into the hands of Americans so we can start pumping some fast cash into our battered economy that’s already showing sickly signs of a recession (yes I think we are already in one). As such, even if you were to request a filing extension, I don’t anticipate the IRS waiting too long to send you your economic stimulus payment.

However, as tax rebate checks will only be sent beginning in May to taxpayers who timely filed their income tax returns, filing for an extension will inevitably delay your rebate payment as the IRS will not issue rebate checks for a taxpayer unless and until a 2007 federal income tax return has been filed. The IRS has indicated that people who file income tax returns after April 15 and receive a refund can expect to receive their economic stimulus payments in about two weeks after receiving their tax refunds, but not before the date they would have received their payment if the return had been processed by April 15, 2008. Despite the IRS’ somewhat ambiguity on the timetable of tax rebates for extension filers, I think taking into consideration the urgency of these rebates, those who file their tax returns as post-April 15 extensions should expect to receive their tax rebates within a month after their returns have been filed.

Remember, if you want to receive your economic stimulus rebate payment before the end of the year, you must file your tax return by the 6 month extension deadline of Oct. 15, 2008 at the very latest. If you delay and file your tax return after the extension deadline, you may need to rely on the tax rebate amendment option when you file your 2008 income tax form on April 15, 2009.