Millions of Americans can still fatten their checks from Uncle Sam.

Look for free money to arrive in your mailbox (or bank account) soon. And, no, this is not a scam. Compliments of this year's Economic Stimulus Act, most single filers will get a $600 rebate and married couples $1,200. Parents will get an extra $300 for every dependent child under age 17.

The first checks go out in May; if your tax refund is deposited electronically, your rebate will arrive that way, too. In fact, the money may show up in your account even before you're notified that it is on its way.

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Most likely, you don't need to do anything extra to get your rebate; it will come automatically after you file your 2007 tax return. But even if the filing deadline has passed, there are plenty of things you can do to ensure you're getting as big a check as possible and to make the money stretch further.

How Much Will You Get?

The rebate amount starts to phase out for single filers whose 2007 adjusted gross income is more than $75,000 and for married couples filing jointly whose 2007 AGI is more than $150,000. The rebate is reduced by $50 for every $1,000 you earn above the income limit.

For a single filer without children, that means the credit phases out entirely at $87,000; for joint filers without children, $174,000. The upper limits of the phaseout zones rise depending on the number of children you have. Children who are claimed as dependents on their parents' returns won't get a rebate, even if they work, file a return and pay taxes.

In general, the rebate amount can't be more than your net tax liability, which is your tax liability before subtracting refundable credits and child credits. But even if you have no net tax liability, you can still qualify for a rebate of $300 as a single filer or $600 as a joint filer if you have at least $3,000 in income from a job or self-employment, or from Social Security or veterans' benefits.

What to Do

To get a rebate, most people need only to file their 2007 tax return. (If you request an extension, you won't get your check until after you file.)

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But about 20 million people will have to take an extra step to get their money. Low-income seniors and disabled veterans (and their widows) who have more than $3,000 in income and don't generally file a tax return need to file to qualify for the partial rebate.

If you (or your elderly parents or relatives) are among those affected, filing the 1040 won't affect your tax bill. It's just the mechanism by which you prove that you qualify for the rebate (it doesn't even matter if the April 15 filing deadline has passed).

But note that you can't use the simplest tax form -- the 1040EZ -- because you can't report Social Security or veterans' benefits on it.

To figure out which numbers to include on the tax return, you should have already received Form 1099-SSA reporting your Social Security benefits. If you receive Railroad Retirement benefits, consult Form 1099-RRB. And if you received disability compensation, a pension or survivors' benefits from the Department of Veterans Affairs, you can estimate your 2007 benefits by adding up your monthly benefits for the year.

Enter your 2007 total on line 20a of Form 1040 or line 14a of Form 1040A. (It doesn't matter that the line is designated for Social Security benefits.)

If you have already filed a 1040 but did not report some of these qualifying benefits, you can file a Form 1040X to amend your return. Listing the additional benefits will not increase your tax liability but could help you qualify for a rebate.

A Second Chance

If you don't qualify for the maximum rebate based on 2007 income, you get another shot for 2008. The law provides a one-time tax credit for 2008; but because it was intended to get money into people's hands as quickly as possible, Congress ordered the IRS to distribute the money in 2008 rather than wait for people to file their 2008 tax returns. As a result, the IRS used 2007 tax returns as a guide.


IRS Timetable for Rebate Payments

Here’s the government’s plan for making the economic stimulus payments for taxpayers whose 2007 returns are filed and processed by April 15:

DIRECT DEPOSIT PAYMENTS
If the last two digits of your Social Security number are: Your rebate should be sent to your bank account by:
00 - 20 May 2
21 - 75 May 9
76 - 99 May 16
PAPER CHECK
If the last two digits of your Social Security number are: Your check should be in the mail by:
00 - 09 May 16
10 - 18 May 23
19 - 25 May 30
26 - 38 June 6
39 - 51 June 13
52 - 63 June 20
64 - 75 June 27
76 - 87 July 4
88 - 99 July 11



It's possible, however, that your 2008 income will drop below the cutoff. Or if you otherwise qualify for the rebate, you could get an extra $300 if you have a child in 2008. (Don't worry: If you qualify for a lower rebate based on your 2008 return, you don't have to give money back.)

Plus, you still have plenty of time to reduce your 2008 taxable income. For example, contributing to a 401(k) plan or a flexible spending account, making a tax-deductible contribution to your IRA, and selling stocks or mutual funds for a loss in a taxable account can all lower your adjusted gross income and boost your rebate.

If you had no income-tax liability for 2007 and don't meet the $3,000-minimum-income threshold to qualify for the partial rebate, you can take several steps to increase your gross income in 2008 and your tax liability. For instance, you may be able to sell stocks, bonds or mutual funds for a profit, convert funds from a traditional IRA to a Roth IRA if you're eligible, or take a dis-tribution from a traditional IRA, says Bob Scharin, senior tax analyst with Thomson Tax & Accounting. If you are retired and work part-time, you could boost your hours.

Keep in mind that the rebate itself is not taxable and will not affect the refund you might otherwise receive for 2008. But if you get the maximum rebate this summer, you won't get it again when you file your 2008 tax return.

Stretch Your Check

A few smart moves can make your check even more valuable. The purpose of the rebate is to help stimulate the economy, so Uncle Sam would like you to spend the cash. But it wouldn't be totally unpatriotic to use the money to rev up your own finances.

For instance, if you haven't been able to max out your 401(k) contributions, now may be the time to do it -- especially if you can get free money from an employer match. If you get the full $1,200 rebate, you can actually afford to increase your 401(k) contribution by $1,600 if you're in the 25% tax bracket. That's because your contributions lower your taxable income, so investing $1,600 lowers your take-home pay by only $1,200.

Invest that $1,600 now and you'll have an extra $16,000 in your account in 30 years if your investment earns an annual return of 8%. And if your employer matches 50% of your contributions, you'll be investing a total of $2,400, which could grow to $24,000 in 30 years.

If you qualify for a Roth IRA and contribute $1,200 to your account, you'll end up with an additional $12,000 in 30 years, assuming that same 8% annual return. And you'll be able to withdraw the money tax-free when you're 59 or older and have had a Roth for at least five years.

Copyrighted, Kiplinger Washington Editors, Inc.ADVERTISEMENT

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