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It’s tax time again and just like always, there are a few changes this year. One important credit that will be available to some people is the Recovery Rebate Credit. It will only be offered on your 2008 federal tax returns, so you should take advantage of the credit, if you are eligible to take it.
The Recovery Rebate Credit is presented this year for people who may not have received the full amount of economic stimulus payment when they were distributed last year. This credit is available as a one time benefit that would make these tax payers eligible for the portion that they did not receive.
The maximum rebate amount for single filers is $600 and for married couples that file jointly, it is $1200. Some people will qualify for a portion of it or the entire maximum amount and could mean a definite increase in their refund. They may be allowed additional rebate money if certain circumstances have changed, such as getting married between the two years.
You could be eligible for the Recovery Rebate Credit if:
- You did not receive the full amount of the stimulus that was offered in 2007.
- You did not have to file a tax return for 2007.
- You have added another qualifying child during the year of 2008.
- You are not allowed to be claimed on anyone else’s return for 2008, even though you may have been claimed in 2007 as a dependent.
- Your situation has changed financially between 2007 and 2008.
When to file for and receive the Recovery Rebate Credit:
The Recovery Rebate Credit is a credit that can be filed for and claimed on all of the three versions of the present tax return. It is filed on different lines of the 1040 as shown here:
- Form 1040: fill in the lines 7, 20a, 70
- Form 1040A: fill in the lines 7, 14a, 42
- Form 1040EZ: fill in the lines 7, 9
These credits will more than likely either reduce your tax owed amount or will increase your refund amount. Unlike the previous economic stimulus payments that were sent as individual checks, the Recovery Rebate Credit amount will be included into your 2008 tax refund check.
Another thing to remember when filing your taxes and claiming the rebate is that it is not considered to be income, so you should not list it on your taxes as such.
In 2001, the Internal Revenue Service reported that millions of federal returns were full of rebate-related errors because of the previous stimulus plan. This was the first attempt to stimulate our economy with a rebate. This tax season could prove to be as confusing for taxpayers and the IRS as the 2001 season because of this new credit.
Although the Recovery Rebate Credit is pretty simple, some tax filers could be discouraged over the variables and all of the considerations that need to be factored in. However, if a credit on your taxes is available and you are eligible, take advantage of the opportunity that the stimulus plan has given you, in order to possibly help the economy.