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Most Americans will soon receive rebate checks from the Internal Revenue Service worth anywhere between $300 and $1,200 or more, and many businesses have already launched marketing campaigns hoping to lure potential customers.
Yet, some folks won't be eligible for a check at all and could end up in a bind if they've already hit the mall and put extra charges on their credit cards, counting on the rebate cash.
The global tax firm of Grant Thornton says that if you belong to any of the following six categories of taxpayers, you should think twice before charging a purchase with plans to pay it off with that "free" government money.
You may not be eligible for a rebate, or at least not for a full or timely one, if:
- You owe the tax man money. The IRS has acknowledged that it will deduct from all rebate checks any federal tax debt. The agency also will withhold on behalf of all 50 states, and even Puerto Rico and American Samoa, any money owed in state or territory taxes. If you owe back taxes to the IRS or any state government, you could see your rebate reduced or gone altogether.
- You make too much money. The rebate payments begin to phase out for individuals with gross incomes above $75,000 and for married couples filing jointly with incomes over $150,000. If your adjusted gross income is above those levels, calculate your rebate carefully before going on a spending spree. Payments to high-income taxpayers will be reduced by 5% of all income above the phase-out thresholds.
- You don't make enough money. If you have less than $3,000 in qualifying income, don't expect a rebate. Only those with $3,000 or more of income are eligible. However, you can count income typically exempt from taxation, such as Social Security or veteran's benefits, to reach that minimum.
- You don't file a tax return. If you don't file a tax return, you won't receive a rebate. Many people with low incomes are not required to file a return, but will need to in order to receive a rebate. If you have more than $3,000 in qualifying income, file a return.
- You're just unlucky. The IRS's recently released rebate payment schedule is based on the last two digits of return filer's Social Security number. However, the IRS warns that a small percentage of tax returns will require additional time to process. For these returns, stimulus payments will not be made according to schedule. Taxpayers who put purchases on their credit cards in anticipation of a quick rebate check may be have to pay unexpected interest if their return processing is held up.
- You don't have a valid Social Security Number. Some taxpayers without Social Security numbers file tax returns using IRS-generated Individual Taxpayer Identification Numbers. These people will not be eligible for a rebate. If married and filing jointly, each spouse must have a valid Social Security number to receive the rebate.
This article was reported and written by Marshall Loeb for MarketWatch.
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