Today I was reading Liz Pulliam Weston's piece on the tax rebate. Now, I'm not very well versed in financial matters, but that's what it sounds like to me...a cash advance. As far deep into the shackles of credit card debt that I am, one thing that I have never liked to do is take a cash advance. Why? Because whenever I cash advance, I pay a lot more interest.
So my understanding of my economic stimulus is this: Wealthy_1 we're going to advance you $1,500 ($1,200 for my husband and me and then $300 for C2) from your 2009 taxable income. Then when April 15, 2009 comes around, you've got to give it back.
Okay. So, maybe when I get the $1,500 I should put it in my savings account to earn interest so that when you ask me for it back at least I've made a couple of dollars on my cash advance. How's that going to stimulate the economy? Here's another question I have: If I owe $1,500 in 2009, does that mean I'm going to have to pay $3,000 in taxes? $1,500 that I owe and then $1,500 because of the cash advance?
Hmmm. Why am I not excited at the possibility of receiving this money?
Friday, February 8, 2008
A Cash Advance?
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6 comments:
Maybe I am confused, but this is not an advance of 2008/9 taxes but a rebate of monies paid in 2006. It isn't income but a one-off tax deduction that is paid out in cash.
Now don't get me started on hose who didn't pay taxes getting a check and those that paid A LOT getting nothing...but thats another post :)
The rebate is not applicable to me (wrong country), but everything I've read about it makes it seem like a great idea at first, then a not so great idea a year or so from now... Hope it's clear about the tax implications when you do get it!!
Canadian Saver, I hope it's clear and simple,too, if and when we finally get it. I guess the real question is: Will it have the effect that the government wants it to have?
racerx,I don't know. I told you my knowledge is extremely basic when it comes to these kinds of things. This is just my take based on what I read in the article.
The best thing to do is read the stimulis package itself...I'm thinking that you will have to report the "rebate" as income for 2008, then pay tax on that..but I haven't read the package, so I'm not sure. As far as I know, using the stimulus calculator, we will be receiving nothing...but I'll be sure that we are paying enough taxes through out the year so there will be no surprises come April, 2009.
You may have to pay taxes on it, but you won't have to pay the whole thing back. It's a refund from last year. I.e. they decided that part of your payment last year was actually just an interest-free loan to them so you're giving it back.
Or, on the darker side, they're getting the money from the deficit because our taxes last year didn't begin to cover the country's debt.
The first describes how it appears in the short-term (how it'll affect your taxes, etc). The second is a more long-term view.
I got this information from an article on yahoo:
What will the rebate mean to my 2008 taxes?
Will I owe taxes on my rebate amount next year? What if this year my situation changes and that means my rebate amount should be less?
For most filers, says Luscombe, this year's rebate will appear as a simple gift from the government. The rebate amounts are tax-free.
But filers will have to reconcile any money they receive this year when they file their 2008 returns.
"It harks back to the 2001 situation when we got the new 10 percent bracket and got an advance check for that. Then on next return had to account for it," says Luscombe. "It's expected to be that way this time."
The 2008 tax forms should have a line for the new credit. When calculating taxes next year, taxpayers will have to subtract what they got as a rebate check the previous summer.
"Some people might think that's unfair," says Luscombe, "but they got the money, and they got it early."
One thing taxpayers won't have to worry about is giving back any excess if their 2008 taxes show that the advance this year was actually more than they should have received.
"If it turns out that credit on your 2008 return is greater, you get to take that additional amount," says Luscombe. "If it's lesser than what you got in 2007, you don't have to refund that back to government." The law says the IRS can't recover the extra payment by reducing your 2008 refund or adding to your 2008 tax bill.
So, from my understanding, the government is lowering the taxes for 2008, but giving you your refund early.
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