The Tax Relief act reduces the lowest tax bracket from 15% to 10%. Most everyone who pays income taxes would be entitled to an advanced payment credit for 2001 of 5% (the difference between the 15% rate and the 10% rate). To receive the payment, you don't need to do anything. Around the middle of July, the IRS will begin sending letters to nearly 100 million taxpayers, telling them how much they'll get and when to expect the money. The IRS will also send a letter of explanation for taxpayers not eligible for the advanced payment. Most single taxpayers could receive checks for up to $300 and married couples could get up to $600. Single parents who claim head of household status will probably get $500. Families could also expect additional benefits from an increase in the child credit. The amount you will receive is based on the taxable income you reported on your 2000 return -- the one that was due April 15. This credit is a reduction of tax and is not taxable income on the federal tax return.
Not every taxpayer will be entitled to a refund. Don't expect a refund if you didn't file a tax return for 2000. You also won't get a rebate if you are a nonresident alien or you were claimed as a dependent on anyone else's tax return in 2000 -- even if you earned more than $4,400 and filed a return on your own. If you did not have an income tax liability you will not receive an advance payment.
Late filers will get their payment as soon as their 2000 return is processed. Late filers should not make any changes or adjustments to the 2000 tax return because of an expected advance payment. If late filers file to fully pay any balance due to reflect an expected payment, they will owe interest and a late penalty on that 2000 balance due. The law states that treasury may not send out any advance payment after December. Tax payers who do not file their 2000 tax returns in time for an advance payment this year may claim a credit, to the extent they qualify got it, on their 2001 tax return.
The advance payment will be reduced because of any outstanding government debt, such as back taxes, or student loan, or because of past-due child support obligations. In such case, the IRS will send the person an explanation of the offset. If the advanced payment amount is larger than the debt, the taxpayer will get a check for the difference. If the full advance payment is applied to the debt, the taxpayer will not receive any check.
Because any bank account information provided by the tax payer when filing the return may no longer be applicable, the treasury will not send the advance payments by direct deposit. Nor will taxpayers be able to request direct deposit of these payments.
If you are one of the 43 million Americans who have moved within the past year and made the move after you filed your 2000 return, it would be wise to file an official change of address form with the US postal Service.
Generally, the last two digits of the taxpayer's social security number will determine when the checks are mailed, so a person may get a check at a different time than a neighbor or even other family member. The chart on the next page shows when you should be receiving your refund.
For married taxpayers who filed a joint return, the first Social Security number on the return will determine the mailing date for the advance payment check.
By the end of June, the IRS Teletax system at 1- 800-829-4477 will have recorded information on the mail out schedule and the steps for figuring the advance payment amount.
In addition to the rebate check, you should see a wage withholding decline slightly in mid-to late -- summer as employers start using new withholding tables that take into account modest reductions in the higher tax brackets.
COLLECTIONS & KITS