Almost every day, there's another news report about the slowing economy. After years of the strong growth, the economy is slowing in many sectors and in many areas of the country. To help jumpstart the economy, Congress recently passed the Economic Stimulus Act of 2008. It's designed to inject $152 billion into the U.S. economy. More than 100 million Americans will receive rebate checks this year, along with child payments for qualifying children.  Also, Congress also extended some help to the troubled housing sector.

Originally, Congress intended to limit the rebates to individuals and married couples who paid federal taxes in 2007. However, this left out a lot of people. Ultimately, Congress extended the rebates to seniors, disabled veterans and widows of veterans.

The rebates are technically a refundable credit against tax. To receive a rebate check (or direct deposit payment) from the IRS in 2008, you must file a 2007 income tax return. Based on that 2007 return information, the IRS figures the rebate for you and will send it by mail or direct deposit without your having to take any further action. If you don't have to file a 2007 tax return because your income is too low but you still qualify for a rebate because of your earned income level, combat pay, or receipt of Social Security benefits, the IRS nevertheless says that you must file a 2007 return for informational purposes or it will have no way to know you qualify.

The rebates themselves are calculated as the greater of (1) net income tax liability, not to exceed $600 ($1,200 for married couples filing jointly), or (2) $300 ($600 for joint filers) if the individual has either (a) at least $3,000 of any combination of earned income, Social Security benefits and certain veterans' benefits (including survivors of disabled veterans), or (b) net income tax liability of at least $1 and gross income greater than the sum of the applicable basic standard deduction amount and one personal exemption (two if a joint return).

What does this mean? For most single individuals (including heads of households and marrieds filing separately) with adjusted gross income (AGI) of less than $75,000 and who pay federal income tax, it means they will receive a $600 rebate. Most married couples filing jointly with adjusted gross income of less than $150,000 and who pay federal income tax will receive $1,200. However, the rebates start to phase-out when a single person's income is greater than $75,000 ($150,000 for married couples filing jointly). Rebates phase out at five percent of the amount exceeding the applicable AGI threshold. The $600 credit for individuals therefore phases out completely at $87,000 AGI, and the $1,200 credit for married couples filing jointly phases out completely at $174,000 AGI. Lower income individuals and people living on Social Security or VA benefits will receive minimum rebates of $300. If you have any questions about how the rebates are calculated, give our office a call and we'll explain it in detail. While the IRS does the math, we advise that you double check the size of the check when it arrives or is deposited.

Filers on extension. Because the rebates are based on your 2007 return, if you file your return after April 15, 2008, your rebate will be delayed. For example, individuals on extension this year who do not file their 2007 return until the extended October 15, 2008 deadline will not receive their checks until year-end. No checks will be sent after December 31, 2008.

After 2008, those who missed out on the rebate or received only a partial rebate get a second shot at qualifying with 2008 data when they file their 2008 return in 2009. This group includes those who did not receive a full $600/$1,200 check either because their 2007 income was either too low or too high, or they did not receive a full $300 child credit because their income was too high or a child was born or adopted in 2008. They get another chance to claim the difference based on their 2008 tax return filed in 2009. If a taxpayer would have received a smaller rebate check if based on 2008 return information rather than his or her 2007 return, however, the taxpayer is not required to give back the difference.

Although determined based on the 2007 tax year, the rebate technically remains a credit against 2008 tax, payable in the form of an advance payment. Consequently, a taxpayer filing a 2007 return in 2008 cannot claim the rebate as an offset to his or her 2007 tax liability reported on that return in lieu of waiting to receive a check. Neither can the taxpayer choose instead to count the rebate as part of an estimated tax installment for either 2007 or 2008.

Distribution. The Treasury Department and the IRS will issue the rebate checks. The rebates come at a very busy time for the IRS, which is processing tens of millions of 2007 returns and issuing tens of millions of refund checks. However, both the Treasury Department and the IRS have indicated that they can handle the additional work.

Although the Treasury Department and the IRS haven't yet released any specifics, they will likely start to issue the rebate checks in May. The government is also likely to utilize direct deposit as much as possible rather than issuing paper checks. Overall, the government will have to issue or deposit more than 100 million checks, so the rebate process will take some time.

You may remember when the government issued rebate checks seven years ago. The first rebate checks were mailed in July 2001. The entire process took about four months. The rebate checks were mailed to taxpayers based on the last two digits of their Social Security numbers (SSNs). Individuals whose SSNs ended in "00" were the first to receive checks and individuals whose SSNs ended in "99" were the last. The Treasury Department and the IRS are likely to use the same distribution process this year. When we learn how the government intends to issue the checks, we'll let you know. Also, if you owe any federal debts or unpaid child support, the government will apply your rebate to that debt.

Child payments. Besides the rebates, taxpayers with children may be eligible for $300 payments per child. For purposes of the new law, the child tax credit definition of qualifying child applies. The child credit is allowed with respect to each qualifying child of a taxpayer. A qualifying child must not have attained the age of 17 as of the close of the calendar year in which the taxpayer's tax year begins. The qualifying child must be the taxpayer's qualifying child for purposes of the dependency exemption. Finally, the child must a son, daughter, stepson, stepdaughter, or descendant of such child, or a brother, sister, stepbrother, stepsister or a descendant of such relative.

Just like the rebates, the child payments phase out for higher income taxpayers. However, there is no cap on the number of child payments that qualifying taxpayers may receive. For example, a married couple with four qualifying children will receive four $300 payments.

Foreclosure help. The fallout from the subprime mortgage crisis continues to unfold in America's financial and housing markets. In many areas, foreclosure rates have hit all-time highs.

The new law raises the maximum amounts of principal for mortgages issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These large mortgages are often called "jumbo mortgages." The government hopes that by backing these larger mortgages, lenders will lower interest rates.

As always, if you have any questions about the new law, don't hesitate to contact us at 315-234-1100. We are ready to help you maximize your tax savings.