Anyone else heard this? So if you are going to owe next year and you got a $300 check, you’ll owe $300 more. Or your refund will just be $300 less next year. I thought it was supposed to be a genuine tax break retroactive to this past year.
Actually I had heard it was a retroactive refund from last tax year. So if the tax law had been amended prior it would just have been a normal tax refund instead of very small windfall.
Of course, I don’t get one, since I just now submitted my taxes for next year. At least I will have once this envelope gets in the mail.
No Dice. It’s an advance on a retroactive rate reduction. That is, the law was passed during the year, the effect was retroactive to Jan. 1, and it is assumed that the effect of the law will be to reduce your tax liability at the end of the year. Rather than make you wait for the end of the year to get back the presumed savings, you are being given that savings now. When you file the 1040 next year, you will have to declare the rebate as a reduction in tax paid during 2001.
As I understand it.
The “retroactive” part of the tax cut means it’s retroactive to Jan 1 2001. NOT retroactive to Tax Year 2000, what was accounted for in last April’s 1040. Remember that most American Taxpayers are paying-as-they-go through payroll witholding and quarterly estimated tax payments. The check is supposed to be an adjustment on the difference between the tax you would have paid for the first half of 2001 under the old rate, and what you’re supposed to actually end up owing. That’s why you hear it called a “rebate.” And this is also why not everyone gets $300 – mother got $156, I got $0, someone else I know got $17; AND why it’s capped at $300/person, $500/hoh, $600/couple – lest you over-rebate too many people. So if at the end of Tax Year 2001 you would end up owing $300 w/o the retroactive adjustment, (and you got the full $300 rebate), the theory is you’re supposed to end up owing just $0 with the retroactive adjustment. But of course, this is estimated based on LAST year’s taxes, so if your situation changed you may end up above or below the target.
When the tax bill was passed, it was made retroactive to the beginning of the year. Every taxpayer pays the same rate up to a certain dollar amount (the “bottom bracket” with more collected in increments for money made beyond that. The amount of money that would have been withheld by each person’s employer between January 1 and the date the new rates became law was estimated to be $600 more than would have been withheld had the new rates been in effect on January 1. The Administration decided to give that “overcharge” back to the taxpayers immediately in order to spur the economy.
The taxes that you will owe next April 15 and the amount withheld should be unaffected by the $300 per person that is being “rebated”. (If your particular employment/taxing/withholding scenario differs somewhat from the general estimates, your taxes in April may be affected–but not by anything approaching $300 per person.)
J’regret! I stand corrected.
This exact question was asked about a week ago, and similar questions have been asked on the rebates for the last month.
The checks are for the tax benefit of a new 10% bracket, on the first $12,000 of taxable income for joint filers, the first $10,000 for heads of household, and the first $6,000 for single taxpayers. This new bracket was carved out of the 15% bracket, hence the $600 and $300 checks (the 5 percentage point difference for $12,000 or $6,000 of taxable income). The checks give you the benefit now instead of having to wait until next year (when you file) to get the benefit.
This provision is the only part of the tax cut that is retroactive. All of the other brackets (except the 15% bracket, if I recall correctly) declined by one percentage point on July 1. Your employer probably adjusted your withholding, but your’re most likely to notice the impact of that come April.