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Another Crack at the Original Economic Stimulus Checks

In discussing the current stimulus package making its way through the government, The Digerati Life questioned why stimulus checks weren’t expected to be part of this plan as they were during the last stimulus bill.  The answer given, that the previous stimulus checks were ineffective at stimulating the American economy, was certainly disconcerting.  Even so, the discussion did remind me to tell all of you about a tax law that could allow many people to get another crack at the original stimulus.

Eligibility for those checks was based on your 2007 tax return when they were issued, but the law actually sets eligibility based on either your 2007 or 2008 tax return.  Obviously no one knew what their 2008 return would be back when the checks were issued, but now that 2009 is here, our 2008 returns will soon be known.  This information could be key to anyone who either didn’t qualify for a stimulus check or only received a partial payment.  Here’s my original information on economic stimulus phase-out amounts and eligibility requirements.

With the current economic downturn, many people have lost their jobs or otherwise seen their income reduced in 2008.  If your stimulus check was non-existent or less than the maximum, you might be eligible for the Recovery Rebate Credit on your 2008 return.  Families with children born in 2008 may also be eligible, since they’ll have another dependent on their 2008 return (worth $300 as part of the stimulus program) that was not included on their 2007 return.  Families who adopted in 2008 are in the same situation.  Tax credits are much more valuable that tax deductions since every dollar of credit means an extra dollar in your return check whereas only a portion of each deducted dollar makes its way back to you.

So if your 2008 income was less than in 2007, you had a child in 2008, or other event that significantly affects your tax situation be sure to ask your tax preparer about the Recovery Rebate Credit or keep a close eye out for that section within your tax return software.  Any additional credit due will be added to your tax return rather than come in the form of a separate stimulus check, but the form of payment is much less important then the fact that you get everything that you are due.