Tax Tip of the Week
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Expect a tax rebate check soon
For the week of
June 11, 2001
Sometime in the next few months, millions of American taxpayers will receive an
advance refund check for 2001. The refund is due to the new 10% tax bracket created by The Economic Growth and
Tax Relief Reconciliation Act of 2001 which became law on June 7, 2001.
How much will it be? The new
10% tax rate is retroactive to January 1, 2001. The 10% rate applies to the first $6,000 of income for single taxpayers,
$10,000 for heads of household, and $12,000 for married couples filing joint returns. Therefore, taxpayers are
entitled to a 5% refund (that's the difference between the prior-law 15% rate and the new 10% rate) for 2001. That
translates to a refund up to a maximum $300 for single taxpayers, $500 for heads of household, and $600 for joint
filers.
Your rebate will be based on your filing status last year, and it will not exceed the total tax on your 2000 return.
Also, if you were claimed as a dependent on someone else's 2000 return, you aren't entitled to receive a rebate
check.
If your rebate check is less than the maximum amount above, you may still be able to get the full tax benefit from
the new 10% rate. However, you'll have to wait until you file your 2001 tax return to receive the remaining refund
to which you're entitled.
When will I receive my rebate?
On July 12th, the IRS is expected to mail taxpayers a letter that will tell them the amount of their check and
when it will be coming. Rebate checks will be mailed first to taxpayers who filed their 2000 returns on time, then
to taxpayers who extended their 2000 returns or filed them late.
Is the rebate taxable? When
you prepare your 2001 tax return, don't include the tax rebate in your taxable income. The tax refund is tax-free
income.
Can I keep the money? Remember
that this rebate check represents an advance 2001 refund. But if your 2001 tax liability ends up being less than
the rebate amount, the rebate check won't have to be returned to the government.
If you have questions about the new tax law and how it affects you, please
give us a call.
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