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2008 Tax Stimulus Package

Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million individuals. The stimulus payments will go out through the late spring and summer. The vast majority of Americans who qualify for the payment will not have to do anything other than file their 2007 individual income tax return to receive their payment this year. The IRS will use information on the tax return to determine eligibility and calculate the amount of the stimulus payments. The Internal Revenue Service will be working closely with the Social Security Administration along with beneficiary organizations to ensure that all eligible individuals know what to do to receive a stimulus payment. They will also be working closely with the Department of Veterans Affairs along with beneficiary organizations to ensure that all eligible individuals know what to do to receive a stimulus payment.

Taxpayers should be aware that there are identity theft scams involving the proposed advance payment checks, known informally as rebates to many Americans. The IRS knows of at least one telephone scam making the rounds, which uses the proposed rebates as bait.

More than 130 million American households will begin receiving Internal Revenue Service letters next week reminding them to file a 2007 tax return in order to receive a 2008 economic stimulus payment.

The mailings by the IRS will begin the first week in March and continue throughout the month. The informational notice, titled Economic Stimulus Payment Notice, alerts people that they may be eligible for a one-time stimulus payment of up to $600 ($1,200 married filing jointly) starting in May. There also is a $300 per child payment for qualifying children younger than 17.

These special letters remind people that they won’t need to do anything more than file a 2007 tax return in order to put the stimulus payment process in motion.

The notice is informational and does not seek any financial information. The main mailings, which will take place in three weekly batches, will go to taxpayers who filed a tax return last year. The IRS will determine eligibility, figure the amount and send the payment. This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds for 2007 will be made separately from this one-time payment.

However, some people must take an extra step this year to receive a stimulus payment. In late March, the IRS will send a special mailing to certain recipients of Social Security and Veterans Affairs benefits. Generally, those benefits are nontaxable and recipients do not file tax returns. In order to receive a stimulus payment, people in this group need to file a tax return if they have at least $3,000 from a combination of certain Social Security benefits, Veterans benefits and earned income. The minimum stimulus payment for these people is $300 ($600 for married filing jointly).

The IRS has created a sample of Form 1040A with information on how to fill out a few lines that will enable eligible people who do not normally file a tax return to receive the stimulus payment.

More details on the special mailings for recipients of Social Security and veterans benefits will be available soon.

The rebate check is computed using amounts from the 2007 tax return. Based upon information in the return, the program will compute an estimate rebate amount in general information.

The 2008 Economic Stimulus Act also has some positive effects for the business entrepreneur. The Act increases the value of the Code Section 179 deduction for equipment or property purchased and placed into service during the 2008 tax year. The deduction limit has been raised from $125,000 to $250,000. The maximum investment limitation is increased to $800,000, and a special additional first year depreciation allowance of 50% on the remaining amount of the assets in excess of the 179 limitation.

The IRS Code Section 179 provides incentives to business owners to invest in qualified equipment or property by allowing businesses to deduct additional depreciation of those investments in the first year, in addition to the Standard Depreciation (MACRS) deduction. This increases the tax benefit the first year equipment is acquired and placed into service.

A commercial taxpayer who owns qualified equipment for business purposes may now be able to deduct up to $250,000 of the value of the equipment. They may qualify for 50% bonus depreciation, in addition to the standard first-year depreciation (MACRS) deduction on the remaining amount.

Qualified business assets include machinery, equipment, furniture, fixtures and other various types of asset additions. For businesses that acquire more than $800,000 of qualified business assets during the tax year, the Section 179 deduction decreases by $1 for each additional dollar spent on qualified business assets.

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