Checks and balances

Tax confusion: Last year's so-called rebate payment is this year's tax-time migraine.

February 27, 2002

CAN TAXES get any more complicated? Apparently, they can.

The Internal Revenue Service says more than a million tax returns so far this year contain mistakes that spring from families' efforts to reconcile the tax windfall checks they got last year.

Remember those checks? They were billed as each taxpayer's personal economic stimulus package - up to $300 for most single people or married people who file separately, up to $500 for single heads of households, and up to $600 for married couples who file jointly.

President Bush wanted the checks to win support for his $1.35 trillion tax-reduction legislation and nudge the flagging economy.

But how do you report that money on your tax return? Answering that question is causing migraines for a lot of people.

Some of the blame can be laid at the feet of Bush administration, bureaucrats and the many in the media who were quick to tag the manna from Washington as a "rebate." This was confusing: It wasn't a refund of past tax payments. Also, it was not new income and shouldn't be reported as such.

The checks were advance payments of anticipated refunds made possible by Bush tax reforms, which shaved a hair from the nation's tax rates at midyear.

Bottom line: If you got the full "rebate" last summer, it won't affect what you owe or what you might get back now. In fact, according to the IRS, if you discover now that you were sent too much, you get to keep it. If you received nothing, or a partial "rebate," Line 47 on Form 1040 - the confusing "rate reduction credit" line - gives you a second chance to collect.

If you got the maximum amount for your filing status, just leave Line 47 blank.

Consider the check mailed last summer a down payment toward your 2001 refund, bonus bucks, or if you are cynical, a personal slice of the growing deficit.

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