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thefantom1
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I found this pretty interesting...doesn't seem to be a "Rebate" at all...
Tax checks in the mail -- with a catch
Practical reasons behind advance-refund system
By David Milstead, News Staff Writer
The tax-relief checks that will start arriving in mailboxes next week
don't
have a consumer-warning label, so we're happy to provide one.
Warning: This check is not a "rebate" of taxes you already paid. It's an
advance on the refund you'll get when you file next April.
If it's an advance, you ask, does that mean my refund in April will be
$300
smaller than it would have been? And if I'm unlucky enough to owe taxes,
does that mean my tax bill will be $300 higher?
The answer to both questions is yes. But you'd never guess that from the
1040 you'll fill out next year. It's been designed so that it's nearly
impossible to realize how the 2001 rebate checks affect your tax
preparation
in 2002.
"I think people think what they're getting is a refund of taxes they paid
in
2000," said Gary Dudley, the tax partner-in-charge at Deloitte & Touche's
Denver office. "If they think their taxes were going to show up lower
April
15 (from this change), they're not."
The "immediate tax relief," as the Internal Revenue Service calls it, was
designed by Congress and the Bush administration to give taxpayers the
benefit of a 2001 tax-rate reduction as soon as possible. Rather than wait
for next April, you'll get the tax cut now.
"Congress intended the credit to take care of the rate reduction for
2001,"
said John McGreevy, an assistant branch chief for administration with the
IRS. "They wanted to get money into people's pockets for an economic
stimulus."
Bear with us for the math on how your check is calculated: The rate on the
first $6,000 of income for singles and $12,000 for married taxpayers
filing
jointly is being cut from 15 percent to 10 percent. That's why the refund
checks range from $300 for singles ($900 in taxes reduced to $600) and
$600
for marrieds ($1,800 in taxes reduced to $1,200).
But if you were to fill out the tax form next April using the new rates,
you'd get the tax-cut benefits a second time. That's why the tax tables
that
will accompany next year's 1040 will charge you the old 15 percent tax
rate,
not the new 10 percent rate.
The IRS could have included a line at the end of the 1040 where you took
the
amount of the refund check and reduced your refund by $300 or $600 or,
even
worse, added that money to the tax bill you owe. You won't have to do
that,
because the amount owed you pull from the tables at the back of the
booklet
will have already done that for you.
"The risk of that (line) approach is that the adjustment could flip you
from
a refund to a balance due, and you really wouldn't believe you received
that
money," Dudley said.
But before you direct your anger at the IRS, look to the folks who
designed
-- and are taking credit for -- this advance-refund system: Congress and
President Bush.
"It was not left to our discretion," said Marilyn Brookens, an IRS
attorney
in Washington. "It was a congressional and presidential decision to do it
this way, and we're implementing what we were told to do."
Brookens points to the tax-cutting language in the report from the
House-Senate conference committee that Bush signed into law earlier this
year. The law said that in 2001, the advance refund occurs "in lieu of"
the
rate cut from 15 percent to 10 percent.
That statement, Brookens said, meant "if we didn't do it this way, we
would
be in trouble with them."
But there are practical reasons, too, Brookens said: "It's an effort to
have
as few people as possible enter a number on the 1040. Every time there's
another computation, it increases the likelihood of errors.
"It's the way that will be quickest, most effective and result in the
fewest
number of errors," she said.
Tax checks in the mail -- with a catch
Practical reasons behind advance-refund system
By David Milstead, News Staff Writer
The tax-relief checks that will start arriving in mailboxes next week
don't
have a consumer-warning label, so we're happy to provide one.
Warning: This check is not a "rebate" of taxes you already paid. It's an
advance on the refund you'll get when you file next April.
If it's an advance, you ask, does that mean my refund in April will be
$300
smaller than it would have been? And if I'm unlucky enough to owe taxes,
does that mean my tax bill will be $300 higher?
The answer to both questions is yes. But you'd never guess that from the
1040 you'll fill out next year. It's been designed so that it's nearly
impossible to realize how the 2001 rebate checks affect your tax
preparation
in 2002.
"I think people think what they're getting is a refund of taxes they paid
in
2000," said Gary Dudley, the tax partner-in-charge at Deloitte & Touche's
Denver office. "If they think their taxes were going to show up lower
April
15 (from this change), they're not."
The "immediate tax relief," as the Internal Revenue Service calls it, was
designed by Congress and the Bush administration to give taxpayers the
benefit of a 2001 tax-rate reduction as soon as possible. Rather than wait
for next April, you'll get the tax cut now.
"Congress intended the credit to take care of the rate reduction for
2001,"
said John McGreevy, an assistant branch chief for administration with the
IRS. "They wanted to get money into people's pockets for an economic
stimulus."
Bear with us for the math on how your check is calculated: The rate on the
first $6,000 of income for singles and $12,000 for married taxpayers
filing
jointly is being cut from 15 percent to 10 percent. That's why the refund
checks range from $300 for singles ($900 in taxes reduced to $600) and
$600
for marrieds ($1,800 in taxes reduced to $1,200).
But if you were to fill out the tax form next April using the new rates,
you'd get the tax-cut benefits a second time. That's why the tax tables
that
will accompany next year's 1040 will charge you the old 15 percent tax
rate,
not the new 10 percent rate.
The IRS could have included a line at the end of the 1040 where you took
the
amount of the refund check and reduced your refund by $300 or $600 or,
even
worse, added that money to the tax bill you owe. You won't have to do
that,
because the amount owed you pull from the tables at the back of the
booklet
will have already done that for you.
"The risk of that (line) approach is that the adjustment could flip you
from
a refund to a balance due, and you really wouldn't believe you received
that
money," Dudley said.
But before you direct your anger at the IRS, look to the folks who
designed
-- and are taking credit for -- this advance-refund system: Congress and
President Bush.
"It was not left to our discretion," said Marilyn Brookens, an IRS
attorney
in Washington. "It was a congressional and presidential decision to do it
this way, and we're implementing what we were told to do."
Brookens points to the tax-cutting language in the report from the
House-Senate conference committee that Bush signed into law earlier this
year. The law said that in 2001, the advance refund occurs "in lieu of"
the
rate cut from 15 percent to 10 percent.
That statement, Brookens said, meant "if we didn't do it this way, we
would
be in trouble with them."
But there are practical reasons, too, Brookens said: "It's an effort to
have
as few people as possible enter a number on the 1040. Every time there's
another computation, it increases the likelihood of errors.
"It's the way that will be quickest, most effective and result in the
fewest
number of errors," she said.
