Tax Rebate Update: Not an Advance

February 13th, 2008

Finally, we have some truth shining through after a week full of questions on whether this tax rebate is an advance or “free money.” In the end, it turns out it is neither. What it is is prepayment of a tax credit we would have received in our 2008 returns. Here’s the skinny from some reputable sources, via an article on WSJ.com:

Q: But what about all these rumors that the payments will cut into what I get as my refund next year?

A: They’re wrong, congressional staffers say. “Please be aware that there have been erroneous reports that stimulus rebate checks are an advance on next year’s tax refund, so that any refund a taxpayer might normally receive would be reduced by the amount of the 2007 stimulus check,” says the Baucus aide. “This is not correct.”

Amy McAnarney, executive director for H&R Block’s Tax Institute, says, “The actual credit will be calculated on your 2008 return. If you’re due a higher credit, you’ll get the remainder next year when you file. If you received a higher credit than you should have, you do not have to pay anything back.”

“What might happen next year,” a House staffer says, “is that somebody who didn’t get their full amount this year could get more, based on their return for 2008. For example, if you had a child born in 2008 and you were within the income caps, you’ll get another benefit of $300 next year when you file your return for 2008.”

Phew! Finally, we have resolution to the concern. Now I no longer have to worry about what to change in my W-4 to cover the difference.