The rebates are coming. What will you be doing with yours?

Posted to: Business

By Carolyn Shapiro
The Virginian-Pilot
© April 30, 2008

Debbie O'Neil knows that U.S. lawmakers want her to spend her tax rebate to add fuel to the flagging economy.

The Chesapeake resident also knows she should pay off the balance on her credit card with the highest interest rate as soon as possible. So, when her rebate check arrives in the coming weeks, she plans to compromise.

"I'm probably going to pay some bills, and I'm probably going to buy a little bit of something," said O'Neil, 56, who said she thinks she might get some new clothes for work. "That'll help stimulate the economy."

Hampton Roads taxpayers, along with those nationwide, began receiving their rebate money this week as part of the $168 billion economic stimulus package enacted in February. Those who elected on their 2007 income tax returns to use direct deposit to their bank accounts will see the government rebate first. Others will receive paper checks, which the Internal Revenue Service plans to start mailing May 9.

Most taxpayers will receive between $300 and $600 per individual, or between $600 and $1,200 for married couples, plus another $300 for any dependent children up to age 17. Individuals with adjust gross income of more than $75,000 will receive reduced or no rebates.

The 15 Hampton Roads consumers who shared their rebate check plans Tuesday split almost evenly among the options of saving the money, spending it or using it to pay bills. Their responses indicated that just less than a third of them expected to pump the dollars back into the economy.

"I need to get out of debt," said Ken Hanson, 29, a bill collector from Virginia Beach who has his own credit card balances to contend with. "I'd rather take care of my bills, so it'll be one less thing hanging over my head."

Sebrina Johnson, 37, pledged for her 2008 New Year's resolution to make "a new start, trying to get debt-free by the end of the year." Reducing her bills, she said, will reduce her stress and make her life easier.

"You just have more freedom" without debt, said Johnson, who lives in Virginia Beach and works for a travel agency.

Others looked at their stimulus payments as a chance to save when they otherwise couldn't because of the high prices of food and gasoline.

"It will be the only time I've ever had that lump sum of money," said Sheila Pitsenbarger, 53, of Portsmouth. "I'm going to sock it away in a savings account. I want to spend it, but I need to save it."

Shawn McClain, 30, said he knows he should save more. However, the Virginia Beach resident said he could end up spending the rebate on music purchases and downloads.

Many of those who planned to spend the money mentioned a desire for home improvements. Adrienne Mayfield, 21, said she wanted to buy new living-room furniture for her home in Chesapeake. "It's like a bonus," she said.

The $1,800 stimulus payment that Loida Tan and her husband expect to receive for themselves and their two children easily could pay for a new dishwasher to replace the 15-year-old one in their Chesapeake home, she said. She's more likely, though, to put the money aside.

"I'm kind of conservative," said Tan, 42. "I'm not the type to go out and spend a lot of money."

Economists have found that, despite the pledges consumers make to save or pay off debt, many will end up shopping with the extra money.

The Federal Reserve Bank of Philadelphia released a report late last year that analyzed the consumer response after the government issued rebate checks in 2001 to boost the economy.

"We find that, on average, consumers initially saved some of the rebate by increasing their credit card payments and thereby paying down debt," wrote the report's authors. "But soon afterward, their spending increased."

To entice consumers to spend their stimulus money, some retailers have offered incentives. Supervalu Inc., the Minneapolis company that owns Farm Fresh, announced last week that it would give a 10 percent bonus to customers who redeem their stimulus checks for store gift cards.

Between Friday and July 31, Farm Fresh and its sister supermarkets will add $30 to each $300 gift card bought with government-issued rebate checks. The Kroger Co. has pitched the same deal to add 10 percent to the rebate amounts converted to gift cards at its grocery stores. So have Sears and Kmart for gift cards bought with stimulus money.

Ella Joyner, 82, made sure to file her tax return this year so that she would receive her rebate money. She hoped to use it to fix her garage or pay for the new windows she installed at her Chesapeake home.

Senior citizens on Social Security, individuals on disability and others with no income tax liability still will receive a stimulus payment of $300 if they had qualifying income of at least $3,000 last year.

Monique Lee of Suffolk said she applied for a federal tax-filing extension, so she didn't expect to receive a rebate check next month.

Taxpayers who file late but do so by Oct. 15 still will receive a stimulus payment this year, according to the IRS.

Lee and her husband, who have two children at home, probably will receive $1,800. Despite the purpose of the stimulus, uncertainty about the future makes her less inclined to spend and increase her existing bills, she said.

"I'll probably pay something off, pay some credit cards," said Lee, 33. "It seems like you should clear your debt, just with the economy the way it is."

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com

No Relief for Low Income

Submitted by joannes43208 on Fri, 05/09/2008 at 1:53 pm.

Most of the people I know are saving their tax money for gas. Just another way Bush siphons money from the American taxpayer to go into his and Chaney's numbered accounts in the Caymans. At least Hillary Clinton is supporting a bill to make big oil pay for the gas tax with their ever increasing profits to give us relief (and she's busy on the campaign trail!). We must be the stupidest people in the universe to let big oil get away with that year after year after year.

johnh31265

Submitted by Tarfu on Thu, 05/01/2008 at 1:33 pm.

So I guess we should expect to see your name on the ballot to take the Mayors or VB city counsels place.

As for my rebate, I'll pay credit cards with it. My big question is why the tax code considers a child to be UNDER 17 and not under 18? My daughter is 17 and only a junior in high school due to an October birth date.

rebate

Submitted by imajerichofan on Thu, 05/01/2008 at 9:24 am.

Got mine Sunday (yes, Sunday) and have already spent it.

Here's were it went
Va Power
Va Natural Gas
Visa
Va taxes (How ironic is this).

"Remember to VOTE OUT VA Beach Council "TAXem DORF"

Submitted by johnh31265 on Thu, 05/01/2008 at 8:41 am.

I'll give my rebate to Mrs. Myra TaxenDorf... Remember to vote the VB Council out.... Remember the Millions lost and wasted to BRAC because of the VB Council's greed and stupidity... Remember the real estates "TAX" increases.... REMBER all The Dumb Mistakes.... Remember how the Council stole your homes and GAVE them to the NAVY!!!!
Remember.....Remember.....Remember.....Remember.....
Vote Them Out.....Vote Them Out...... Vote Them Out..........

That SF Gate answer is obviously wrong

Submitted by jasona57192 on Thu, 05/01/2008 at 7:36 am.

The answer to that last question in that article is obviously wrong. They're saying what you calculate on your return isn't what you calculate on your return. I'm not aware of a magical, invisible return that you file with different numbers on it.

The only way it would be less is if you calculate your return incorrectly and do not put that you received the rebate. People that don't receive it now can get it through their 2008 refund but you don't get it twice.

Tax Rebate

Submitted by Christylanz on Wed, 04/30/2008 at 11:22 pm.

Well, let me see, what will I do with this rebate. Use some of it for
gas..that way, I can attend Church two times a month instead of one. Make a trip to buy groceries three times, maybe. Make a trip to my husbands grave one time a month, instead of once every 3 months, even, take flowers. Beomg able to put gas in my car a little more often, I could afford to visit my children once a month. They only live four miles away. So, it looks like the gas station will get the most of it. If I play my cards right, I may be able to stretch it through the summer. Whoopee! Brighter days ahead.

Gonna add to my collection

Submitted by bens1982 on Wed, 04/30/2008 at 9:31 pm.

I think I'll go get that new .45 i've been eyeing for awhile.

coolguy, et al

Submitted by Just_my_opinion on Wed, 04/30/2008 at 8:33 pm.

Do some research...the SF Chronicle article is factually inaccurate.

The rebate isn't taxable, and it doesn't impact 2008 taxes...at all. Google 'tax rebate myths'. It's pretty simple.

I have my withholdings set up so that I break as close to even as possible. If what you say is true, I'll owe $1200 in taxes for 2008 to pay back the rebate. My father has no taxes withheld from his retirement and SS, because he has no tax liability. If what you say is true, he'll owe $300 for 2008 to pay back the rebate.

Don't believe everything you read online.

jmo

An example to clear the confusion

Submitted by jasona57192 on Wed, 04/30/2008 at 6:54 pm.

Here's an example to show how this works. Say you made $30,000, had
$4,000 withheld, and are filing single with the standard deduction:

30000-5450 = 24550 taxable income
You pay 10% on the first $8025 and 15% on the rest:

Without rebate:
8025 * 10% = 802.50
16525 * 15% = 2478.75
Total Tax: 3281.25
Withheld: 4000
Refund: 4000 - 3281.24 = 718.75

With rebate:
8025 * 10% = 802.50 - 300 rebate = 502.50
16525 * 15% = 2478.75
Total Tax: 2981.25
Withheld: 4000 - 300 rebate = 3700
Refund: 2981.25 - 3700 = 718.75

So, your refund is the same but you get an extra $300 check out of the
deal.

No free lunches

Submitted by georges61555 on Wed, 04/30/2008 at 6:03 pm.

Don't think you won't be taxed later for this token amount of money. George Bush is just trying to increase his approval ratings before leaving office.

I Will Gas My Car

Submitted by leighb18417 on Wed, 04/30/2008 at 5:29 pm.

With gas prices over $3.50 a gallon for regular, I can put gas in my car for two months with my check.

Just_My_Opinion

Submitted by coolguy81 on Wed, 04/30/2008 at 5:13 pm.

"It's not taxable, and it won't reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return." (www.irs.gov)

The reason the IRS can say this is because its not actually "reducing" your refund. You will get the same refund, you are just getting a big fat piece of it right now.

In fact, if you scroll down to the last question at this link

"http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/12/BUOAV0BJP.DTL"

It clearly states that the 2008 refund will be smaller.

This leads me to believe that this tax "rebate" is going to come out of us as a line item next tax filing season. Cheers.

Spend spend spend

Submitted by jagster on Wed, 04/30/2008 at 5:09 pm.

Come on guys. We need to spend it so that we can bolster the economy.

I am sure the economic brains who came up with this idea would have done all the research. This is the least we can do for the country.

And to all the people who say we are actually bolstering China's economy - say you buy a plasma tv from Best buy (BB), the gov gets the sales tax, BB makes a profit so they pay income tax to the gov. BB quarterly results are good and so they invest in IT or advertisement or open new stores or hire more people. It is a cyclical process and the chain reaction starts and goes on.

I believe in our economic gurus and am going to spend.

These are the ideas I would consider - iphone, go on a Cruise, visit Atlantic City. I need to think more on this.

So, everybody, spend spend spend.

IRS will get my rebate....

Submitted by Samson on Wed, 04/30/2008 at 5:02 pm.

thanks to H&R Block for screwing up our tax return. They showed us how they find that extra refund money alright....they told us we would get $900.00 of our money back, but after we mailed the refund we got a letter from the IRA stating we owed them $586.00. That $600.00 rebate check will just cover it. Thanks for nothing H&R Block. Next year you won't get a second chance to fool some of us. BTW, we had them redo the taxes and the lady said to my husband, "be prepared for an audit". Oh yeah, we'll use her 1040X extension file.

I make less than $75,000

Submitted by chesschamp on Wed, 04/30/2008 at 4:57 pm.

Both of you completely missed my point that if the wealthy don't get a rebate, that in fact it amounts to wealth redistribution, i.e. socialism. I was not calling hard working individuals who make less than 75k, such as myself, slackers. I was saying that there is less incentive to work hard if the government will give you $600 out of some rich guy's paycheck.

Just_My-Opinion is correct

Submitted by melissal81 on Wed, 04/30/2008 at 4:36 pm.

Just_My_opinion is correct. This refund package is different than the one that was created a few years ago. The one a few years ago was simply a premature refund of the refund you would be receiving when you filed your following year's taxes The guidance on this refund shows that it is truly a refund, no strings attached, and you will not be required to reduce your 2008 tax refund on your tax return by the amount you receive from this refund.

coolguy

Submitted by Just_my_opinion on Wed, 04/30/2008 at 3:41 pm.

You are incorrect about these rebates reducing next year's refund.

"It's not taxable, and it won't reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return." (www.irs.gov)

If you get this money, it's yours to keep. Just wanted to clarify that.

(BTW, I'm buying a horse.)

jmo

Primrose Path

Submitted by Wallace08 on Wed, 04/30/2008 at 2:37 pm.

My husband and I will put it to good use on an already planned cruise. We are thankful to receive some of our hard earned money back. Everyone may not be in the same boat (no pun intended) as we, but this is our choice. Stimulate the economy? Probably not, but we're just small fish in a big sea. We are neither rich nor poor and we certainly didn't get the money because we're "bums" or "slackers". We work hard for what we have and consider ourselves blessed.

not lazy

Submitted by Amy on Wed, 04/30/2008 at 1:54 pm.

Gee, since when is the military LAZY? I guess because our income is well under that $150K/yr we are LAZY. As for our income, we plan on saving for an emergency and maybe putting some aside for a trip to grandmas.

Rebate

Submitted by CJackCity on Wed, 04/30/2008 at 1:53 pm.

I am going to buy Chinese Junk. Seriously, I always wanted a boat.

Chesschamp

Submitted by coolguy81 on Wed, 04/30/2008 at 1:33 pm.

Id be careful who you label as a slacker. Many people receiving those checks, which by the way, are an advance on next years tax refund, not free money, work far harder then you ever will in a day. The only difference is, the value they generate is largely stolen off their backs and handed to the oligarchy of the company. I think the wealthy falsely assume that those around poverty simply "dont work hard". I challenge most any of them to put on a hard hat and work as a day laborer, or a janitor in a high school, a farm hand, as a waitor, a CNA or hell, even as a fast food worker. Im sure their tune would change dramatically.

responsible

Submitted by joanie06 on Wed, 04/30/2008 at 1:32 pm.

Only debt is my mortgage. Wife and I are going to Disney next week.

Poco

Submitted by coolguy81 on Wed, 04/30/2008 at 1:24 pm.

1. The money being "given" out, is not a gift, it is an advance on next years tax refund. YOU as wealthy people are not paying for anything. It is once again the US government trying to fix today with tomorrow. The "poor" people are paying for this tax refund out of next years tax refund, and the only people who get "free" money, are people too poor to pay back what they get this year, next year, because from what I understand, these "refunds" will not be able to put you in the "negative" next year.

2. What a person "earning" is relative to definition of "earn". If sitting on top of a company and collecting off hundreds of people toiling for the minumums backs is "earning", then I guess you earned every penny.

3. I imagine you know little of Karl Marx, or his philosophies, simply what is perpetuated by Western media while maintaning the image of the "big red devil" Senator McCarthy first popularized on his witch hunts.

MY REBATE?

Submitted by johnp32882 on Wed, 04/30/2008 at 1:19 pm.

I don't know; maybe something Chinese, since that appears to be the ultimate recipient of these borrowed(mainly from China)funds anyhow.

Or, maybe I'll just sit on it, to determine if I have to pay taxes on it next year.........

my wife nixed the idea

Submitted by charterwellsjr on Wed, 04/30/2008 at 1:12 pm.

This rebate thing is one more example of government's fiscal mischief. Investing the $160 billion into public works projects, particulary transportation, would have provided greater and longer lasting stimulus.

"We'll send it back," was my initial reaction to this stupid "economic stimulus" idea. But my wife quickly nixed that one. Half of ours will go to mortgage principle, the other half to help our church pay down its mortgage. No "economic stimulus" from us!

Maybe I'm unpatriotic because I refuse to heed the call to spend, spend, spend and spend some more.

Before you start spending

Submitted by DVA87 on Wed, 04/30/2008 at 12:27 pm.

*remember this IS income and even though it is being given by the government they will still tax us on it. I was one of the many unemployed last year so looks like no stimulus payment for me. =(

RE: Alexvb

Submitted by angelak on Wed, 04/30/2008 at 12:27 pm.

Oh sorry, I just threw up a little...

Endless possibilities await......

Submitted by A Katz on Wed, 04/30/2008 at 12:18 pm.

A trip to Cancun, or a new suit....maybe put a few bucks in the bank. As others have mentioned, this "stimulus package" will do little to bolster the economy through the purchase of new goods. Those who don't need the money will put it in the bank, and hopefully those who have debt will apply their new found wealth to past spending indiscretions.

It will take more than a few shekels to bolster THIS economy. I have to wonder where those who created this economic uncertainty will spend THEIR rebates.

WOW! Poco!

Submitted by Dave the Bud on Wed, 04/30/2008 at 12:09 pm.

After reading your fear of our country turning communist over REBATES given to us by our Government .... I would have hated to see you back in the days of the Cuban Missile Crisis ... you would have had a heart attack!