Your government tax rebate is official. President Bush signed the Economic Stimulus Package into effect Wednesday afternoon. But it's really not a rebate, rather an advance on your 2008 tax return. Are you more confused than you were already?
This stimulus package even had a Lubbock CPA and TTU Economics professor a little confused to. But the bottom line is the money you will receive is not taxable income, and despite what many have heard, you won't owe the government any money later for receiving this rebate come summer.
"From what I have read, the economic stimulus plan is an advanced refund," said CPA Stanley McRae.
Wait a second! Most believe this is a rebate, not a cash advance. But Lubbock tax expert Stanley McRae says this plan will be an advance on what you would have received on your 2008 tax return.
"It's my understanding that, that advanced refund will not reduce their income tax below zero," said McRae.
Put simply, you won't owe more taxes later because of this rebate.
For example, if a single person were to receive a $600 rebate check from the government and their 2008 tax return was supposed to be $900. That person would receive $300. However, if they were to receive less than a $600 refund in 2008, the rebate cancels out their refund, and the taxpayer would not owe the difference.
"The whole idea of this is they want people to go out and spend it whether at Wal-Mart or anywhere and try to stimulate the economy by spending more money," said McRae.
But will people do that? Only time will tell and Assistant Professor of Economics at Texas Tech Peter Summers believes the stimulus the government was hoping for might be lessened because of all the confusion.
"The confusion is going to add some delay to this, people will say, maybe I should save it, or save part of it just in case. And so that in and of itself could render the rebate less effective," Summers said.
Despite that and based on past economic stimulus plans, Summers still believes this plan will be positive for our economy.
"I think that this package probably will have some beneficial effect. As I said, it's not as much as it could have been, but I do think there will be a fare bit of stimulus that will come from this," he said.
Bottom line, the rebate check you receive this year could affect your next year's tax return. The government will send out the first round of rebate checks in May.
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