Tax Rebates

Hey VOL FANS! It’s Tax Time in Tennessee! The question that seems to be on most peoples’ minds is: What do I do about that extra IRS check I got this year? Well, that check was considered a “rebate” check for your tax liability for the first six months of 2001. In other words, it isn’t income, but it isn’t a refund either. You need to have that information available when you prepare your tax return for the 2001. There is a new worksheet on which you calculate how much of the Rate Reduction Credit you are entitled to. The check you received was based on your 2000 tax return that you filed last year. If your income was over the limits ($6000 for individuals, $10000 for heads of households, $12000 for married filing joint returns) then you are entitled to the maximum credit of $300, $500 or $600 respectively. If your 2000 income wasn’t over the limit, you got a smaller check. But that’s OK because now, if your actual income for 2001 is over the limit, you can get any extra credit to which you are entitled applied to this return. What if you got more back than you should have because you made less this year? This is what I love about our government: you get to keep it, no questions.

What this means to you right now is that, as you are gathering the information to take to your tax preparer, or to prepare you return yourself, you are going to need the amount of that check to prepare the Rate Reduction Credit Worksheet. It isn’t that difficult and it’s included in the instructions.

What if you didn’t have to file a return last year? You may still be entitled to the credit, but not if you can be claimed as a dependent on someone else’s return. Notice, that’s not if you are claimed on someone’s return, but if you can be claimed.

There are a number of other rule changes this year, most of which are to the advantage of the individual taxpayers. Businesses got very few new breaks. All of the tax brackets are modified, the standard deduction and personal exemption amounts are increased. Child Tax Credits have been increased for the first time, and will be increasing again in a couple of years. Earned Income Credits have gone up as well.

So get your information together and go see your tax professional as soon as possible. Even if you think you’re going to owe Uncle Sam, it’s better to find out how much now so you have a few months to cry over it before you send it in. By the time this hits the press I’ll have already filed a few returns for some anxious clients who just couldn’t wait to get their hands on that refund.