Alert: Many Tax Rebate Checks Will be Subject to Offsets
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Many Tax Rebate Checks Will be Subject to Offsets


Many Americans are anxiously waiting for their tax rebate and income tax refunds to arrive.

The tax rebate checks, part of President Bush's Economic Stimulus Act of 2008, are separate from income tax refunds but are subject to some of the same rules that apply when income tax refunds for tax over-payments are due.

The IRS has recently mailed two notices to taxpayers.

One advised Americans of the economic stimulus plan and the second notice informed taxpayers how much their tax rebate check would likely be and when they could be expected.

There are just a few catches that will make the stimulus plan not that great for everyone.

Outstanding Tax Debts

For people who already owe the IRS money for past due taxes, interest or penalties, the amount owed to the IRS will be deducted from the amount of the tax rebate check that the taxpayer would have received.

The amount that is leftover, if any, will be sent to the taxpayer or applied to state income tax obligations or other non-tax and federal debts.

Non-Tax and Other Federal Debts

The IRS may also deduct past due child support payments from non-custodial parents' income tax refunds or tax rebate checks.

Past due federal debts such as student loans may also be deducted from the expected tax refund and rebate checks. After all debts are satisfied, the leftover amount, if any, will be sent to the taxpayer. The Office of Child Support Enforcement estimates that the tax rebate checks could allow for the collection of $750 million in unpaid child support.

Joint Tax Returns

If a husband and wife file a joint federal tax return, but only one spouse owes an outstanding debt that will be deducted from the tax rebate check, the other spouse may file an Injured Spouse Claim (Form 8379) and will receive 50 percent of the tax rebate check that they are entitled to get as the injured spouse.

So after the IRS deducts anything that they possibly can from the tax rebate checks, the remaining amount, which in some cases will be mere crumbs or nothing at all, will be sent to taxpayers to help them stimulate the United States economy.

Because of the number of people who have outstanding tax debts, student loans and child support debts that must be cleared before tax refunds or rebates will be paid, a large chunk of the money meant to stimulate the economy simply will not.

This also means that many people who may have planned to use the money to pay bills or mortgage payments to avoid bankruptcy or foreclosure will be out of luck.

The tax rebate checks may help some people, but if, when and how much of a tax rebate check will arrive is still largely a mystery for many people who are in desperate need of the money to keep their heads above water in our sinking economy, if only for just a little longer.

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