IRS says up to 350,000 tax rebate checks wrong

According to this article on tax rebate checks:

Up to 350,000 households aren't getting the $300 per child owed them as part of their economic stimulus rebate payments, the Internal Revenue Service said Thursday.

The tax agency says taxpayer human error and computer glitches were responsible for the problem affecting a tiny percentage of the 130 million taxpayers expected to benefit from the refunds the government began sending out last month.

IRS spokesman Terry Lemons said the agency was confident it had identified all the people affected by the mistake. He said the IRS will send letters to those who missed out on the refund and that checks for the child credit will be mailed out in July. People need not contact the IRS or file additional paperwork, he said.

FBI Warns of Tax Rebate Check Scam

According to this article on the tax rebate checks, as the IRS began sending economic stimulus checks to eligible taxpayers, the FBI is warned recipients about a scam related to the money.

Fraudsters are sending out fake e-mails notifying individuals that direct deposit is the fastest and easiest way to receive their tax rebate checks from the IRS.

After clicking on a link that appears to be from the IRS, computer users are asked to enter personal and other information, including bank account records, which scammers use to withdraw the money — usually via wire transfer.

According to the complaints received by the FBI, the fake e-mails claim, "Our records indicate that you are qualified to receive the 2008 Economic Stimulus Refund. The fastest and easiest way to receive your refund is by direct deposit to your checking/savings account. Please follow the link and fill out the form and submit before May 10th, 2008 to ensure that your refund will be processed as soon as possible."

The fraudulent e-mail warns that "Submitting your form on May 10th, 2008 or later means that your refund will be delayed due to the volume of requests we anticipate for the Economic Stimulus Refund."

In a report on Internet crimes last month, the FBI estimated that people lost $240 million to such crimes in 2007.

According to FBI officials, there have been more than 1,000 different e-mail scams purporting to be from the IRS in the past several years.

The FBI warning to consumers and computer users from the Internet Crime Complaint Center notes, "Consumers are advised that the IRS does not initiate taxpayer communications via e-mail. In addition, the IRS does not request detailed personal information via e-mail or ask taxpayers for the pin numbers, passwords."

Tax rebates start showing up in bank accounts

WASHINGTON - The government began depositing tax rebate checks in thousands of bank accounts on Monday as the stimulus program aimed at giving the ailing economy a jump-start got under way early.

The Internal Revenue Service started making the direct deposits on Monday with the goal of completing 800,000 payments each day over the first three days of this week. No deposits will be made Thursday while the IRS prepares a big batch of 5 million direct deposits scheduled on Friday.

The IRS had expected to begin the program in May but was able to start a few days earlier by utilizing a computer system that can process payments on a daily basis. The government's paper checks will start going out on May 9, a week earlier than previously announced.

The rebates, which are expected to reach 130 million households, range up to $600 for an individual and $1,200 for married couples plus $300 for eligible children younger than 17.

What will you do with your tax-rebate check?

Here’s a fun msnbc.com article detailing what Americans plan to do with the forthcoming rebate checks…

Answers from consumers vary from gas and credit-card bills to McDonald’s

Is an extra $800 in your pocket enough to change the course of the ailing economy?

President Bush, Treasury Secretary Henry Paulson and members of Congress seem to think so. Washington is talking about issuing tax rebate checks in hopes of staving off a recession. And people around the country, many of them struggling to pay bills, staggering under credit card debt or worried about their financial futures, aren't about to turn them down.

I would probably take that money and breathe a sigh of relief for one month," said Jennifer Simon, who works at a small communications firm in Long Valley, N.J., and spends $1,500 a month on child care.

"It's not a permanent fix," she said, "but I wouldn't send it back."

Taxpayers got smaller rebates, $300 per person, under a similar plan in 2001. There is debate in economic circles — as usual — about whether those checks warded off recession or went straight from the U.S. Treasury into Americans' savings accounts.

This time around, while some people may put the rebate toward a big-ticket item like a flat-screen TV, many echo Ginger Scott, a home-health physical therapy worker in Kansas City, Mo. She says she wouldn't buy anything exciting.

"I think I had too much exciting previously," said Scott, 52. "Exciting will kill your budget." Instead, she said she'd pay off a credit card bill and save what's left over.

President Bush on Friday embraced as much as $150 billion in tax relief, most of it for individuals, to jump-start the economy. He said the country would be "just fine" if Congress passes the stimulus.

While the administration is avoiding specifics, congressional aides said the White House was considering rebates of up to $800 for individuals and $1,600 for married couples. The checks could arrive by late spring.

In interviews, Americans gave a range of ideas for how they'd spend the money, some of them reflecting the pinch of a difficult economy in which the costs of food and gas are rising and jobs are harder to come by.

Take DaMel Nixon, 33, a mailhouse quality control supervisor in Lansing, Mich., who used to be an avid buyer of music but is unlikely to use his $800 to splurge on CDs because he needs money for gas.

"I'm going to need that $20 to put in the tank," he said.

In Fargo, N.D., Doug Benson said he would spend half of the $800 on bills and half on new beds for his children. In New York City, Landy Ung said she would plow the money into her startup Internet business as an incentive for her salespeople.

At a mall in Madison, Wis., Antonia Rivera said would love a new pair of snow boots, but said she'd save the cash anyway. She hopes to retire from her job as a supply clerk at the University of Wisconsin Hospital next year but fears she may not have enough money.

So she's cutting back on all her purchases. "If I need it, I look for the best price," said Rivera, who is 68. "If I don't really need it, I don't buy anything."

And in Kansas City, Jenise Lemmones said she'd let her 8-year-old granddaughter, who lives with her, call the shots: "She just likes to go to McDonald's and the movies."

When the 2001 rebates went out, two-thirds of the cash was spent within six months, according to one paper published by the National Bureau of Economic Research, a private research group that serves as the national arbiter on such matters.

Fans of the rebate say that spending was enough to keep the country out of a longer, more painful recession.

"The recession officially ended the month after the stimulus package checks were sent out," said David Wyss, chief economist at Standard & Poor's.

But a conflicting report, also published by the National Bureau of Economic Research, found the bump in spending went almost entirely to the auto sector, which was then offering zero-percent financing.

"The majority of consumers saved or paid off a debt rather than spending it," said Matthew Shapiro, professor of economics at University of Michigan, who co-wrote the second report.

Economists do agree on this much: A stimulus like this is a one-shot deal.

"Once people have spent it, they may ask, 'Who's going to cover next month's expenses?'" said economist Edward Yardeni, who runs his own research firm.

Still, if the stimulus package passes and it works, it could be worth every penny because the government will save a fortune in the long run, said Mark Zandi, chief economist at Moody's Economy.com.

A deep recession would mean lower tax receipts coupled with increased spending on unemployment insurance payments, welfare and food stamps.

"One hundred-fifty billion dollars, could, in the end, save us $500 billion if it saves us from a long, lengthy, severe recession," he said.

That's not enough for Scott, the Kansas City home-health worker. She wants a long-term fix including tax breaks for health insurance payments by the self-employed or more investment in small business.

She is suspicious of the tax rebate stimulus because "we like to gratify ourselves quickly in this country," she said. "We buy things we can't afford. We are a charge nation."

Rebate, Redux, Reflux

Here’s an excerpt from a Forbes.com article on the recently approved tax rebates.

It sounds simple. The economic stimulus package President George W. Bush signed today requires the U.S. Treasury Department to send "tax rebates" of $300, $600, $1,200 (or more, if the recipient has kids) to 128 million American households.

The checks will start going out in May. The $100 billion-plus cost will be added to the deficit, and we (or our children) will pay for it later--with interest.

Except these checks aren't rebates, exactly. And nothing about them is simple. The rebate is technically a credit against your 2008 tax bill that is being paid (in most cases) as what we'll call a "prebate." This prebate is based on your 2007 income tax return. The actual credit is based on your 2008 tax return. Whichever year produces the bigger check for your family

To complicate matters further, there are not just two tax years, but three different types of credits involved. Plus, all three credits are denied to folks who earn too much--with the benefit starting to phase out at $75,000 adjusted gross income for an individual and $150,000 for a couple. The $75,000 threshold also applies to single parents filing as heads of household.

Given such complications, it's not surprising that tax advisers have been brainstorming how families can get the greatest possible stimulus benefits by managing their 2008 (or even, in some cases, 2007) taxable incomes.

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Rebate checks floated as way to boost economy

According to an article on CNNPolitics.com on income taxes and the economy:

Treasury Secretary Henry Paulson ended his third meeting of the day with House leaders Wednesday night with no indication of a deal on a $150 billion economic stimulus package.

But a GOP leader told reporters more public comments could be expected Thursday morning.

House Minority Leader John Boehner, R-Ohio -- who spent an hour and a half with Paulson and House Speaker Nancy Pelosi, D-California, on Capitol Hill on Wednesday night -- would not say if leaders were close to a deal.

"We're hopeful," he said. "We'll have more to say tomorrow morning."

Pelosi would not answer questions about any announcement of a deal. "We're moving toward that," she said. "We're not at that place yet."

The late-night negotiations are a sign of the urgency of the talks as the United States slogs through an economic slowdown.

While the final details are still being negotiated, officials in both parties said the current outlines of the package would give individuals a tax rebate check in the neighborhood of $800, while families could receive up to $1,600.

The main sticking point in the negotiations is who the rebate checks should target. Bush has said he wants rebates for those who pay income taxes.

But Democrats say such an approach would mean tens of millions of households would get only a partial rebate or none at all -- about 65 million, the liberal Center for Budget and Policy Priorities estimates.

That group includes those whose tax bill is so low that their rebate would be much less than $800 or $1,600, as well as low-income households with no income tax liability because of credits and other tax breaks. It would also include households that do not have to file a tax return.

The current strategy is for Pelosi and Boehner to iron out the details with Paulson as soon as next week and then get the package passed in the House by the first week of February, according to officials in Congress and in the Bush administration. That will then pressure the Senate to pass the same version by mid-February before lawmakers leave town for the Presidents Day recess.

Even if that goal is reached, however, Bush administration officials acknowledge it may take several more weeks before the Treasury Department can actually cut the rebate checks and get them in the mail for consumers -- a task that will be more difficult because the Internal Revenue Service is very busy now dealing with 2007 tax returns.

One senior official noted the president signed a similar 2001 round of tax rebates around Memorial Day, after the IRS's busy season.

"We're working with the IRS right now to figure this out," the official noted.