Monday, February 11, 2008

Economic Stimulus Package: Not The Massive Bamboozling Initially Feared... Sort've

It was speculated here that the Economic Stimulus Bill (which congressed passed on to the White House on Thursday by a vote of 380 to 34) may in fact only be an advance on 2008 tax year refunds. In other words, taxpayers would be given a loan on next year's refunds that they hadn't asked for in first place.

While I certainly wouldn't put it passed our government to do something so extraordinarily heinous as to dump $152 billion dollars of national debt directly into the laps of low-middle income families, this doesn't appear to be the case.

The payments are actually going to be advances on a one time credit against 2008 income tax. In other words, they are going to send you a check now, for a new credit that will be applied against 2008 income tax. And since you will have already received the credit when it comes time to file your 2008 tax return, it will be as if the credit didn't exist. Your 2008 tax return will not be affected (besides aesthetically) for the credit.

It will look something like this:

Tax before credit - 1,000
Less: stimulus package credit - (600)
Add: credit already received - 600
Tax after credit - 1,000

Having said that, don't be a clown; put whatever money you get from the government away for retirement.

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