By Ken Kretzer, Grant Thornton LLP

President Bush recently signed into law the Economic Stimulus Act of 2008 as part of the federal government's plan to help stimulate our economy. An estimated 130 million taxpayers will receive rebate checks beginning in early May by mail or direct deposit.

For those who may have questions about the rebates, here are some answers:

How do I qualify for the rebate?

In order to receive the rebate, you must:

• File a 2007 income tax return. This must be done even if you do not have any tax liability. The IRS will use the information contained in the return to determine eligibility and the amount of the rebate.

If you normally do not have to file a tax return, the IRS has a special procedure in place to allow you to electronically file. Go to the IRS web page, www.irs.gov, and check out the information in the center of the page. There is a link to the IRS’ Free File program.

• Have a valid Social Security number. If filing jointly, both taxpayers must have a valid Social Security Number. If claiming a credit for a dependent, make sure to include the dependent's Social Security number on your return.

How much can I expect to receive?

The rebate check may be equal to $600 for single taxpayers and $1,200 for married couples filing a joint return, but no more than the individual's "net tax liability."  Net tax liability is the amount of tax for the year determined without reduction for the child credit, the earned income credit or any other refundable credit.

In addition to the basic rebate, eligible taxpayers can receive $300 for each dependent child under the age of 17 as of December 31, 2007.

Note: A taxpayer who is claimed as a dependent on someone else's return cannot receive the rebate.

A special rule will allow rebates of $300 (single) or $600 (married filing a joint return) to be paid to individuals without net tax liability whose earned income, Social Security payments and veteran's disability payments are at least $3,000.

The amount of the rebate will be reduced for single individuals with adjusted gross income (AGI) in excess of $75,000 and for married couples filing a joint return with AGI in excess of $150,000.

The reduction is equal to 5 percent of the excess AGI.

How will the rebates be distributed?

The IRS will distribute rebate checks by mail or direct deposit depending on the information provided on your 2007 tax return. For example, if you would like your check deposited directly into your account, include your account information on your return, even if you will be making tax payments with return. The IRS will use this information to issue the rebate checks.

If your return is filed on an extended due date, your rebate will be delayed.

For returns filed by April 15, the actual payments will usually be made based on the last two digits of your social security number (or the first social security number listed on a joint return) according to the following schedules:



These rebates will not be considered income when received. They are treated as if you made an advance payment of your 2008 taxes, therefore, you cannot claim as an offset of your 2007 tax.

If your 2008 return information indicates that your rebate should have been larger, there will be a procedure available to collect the difference. If, however, your 2008 information indicates the rebate should have been less, you will not be required to pay back the difference.

Beware of tax scams.

The IRS mailed information notices to taxpayers  and will be sending more information, but please be aware of tax rebate scams such as telephone calls or e-mails claiming to be from the IRS asking for sensitive financial information.

The IRS will not call or e-mail taxpayers about these payments or ask for financial information such as account numbers or addresses.

Consult your tax adviser with any questions.

Ken Kretzer is a senior tax manager for the Honolulu office of Grant Thornton LLP. He can be reached at Kenneth.Kretzer@gt.com.

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