Tax Pro's and Accountants

[Jeff In Milwaukee]

What's your take on the tax "prebate" this year? I'm looking ahead specifically to the 2008 tax return.

Am I reading this correctly?

My assumption is that the tax cut is for the 2008 tax year, and so one would calcuate their taxes as usual and determine their refund. Then they would calcuate what they've got coming for the tax cut. Adding those two figures would give them the "Total Refund" for 2008.

They would then reduce their refund by the amount they received from the "prebate."

Am I reading this correctly? All things considered (and for most filers) the 2008 tax refund would not be effected by the prebate. It should essentially be a wash, right?

Note: Cross-Posted from the Economy Forum

[wishlist]

1. My hunch from what happened in 2001 is the rebate won't affect 2008 tax return

I looked at my 2001 tax return since the previous rebate went out that year. I could not see any mention of the rebate anywhere on the tax return. My tax return looked same as always and I did not have to claim the rebate or use a tax credit to write it off either. So if it works the same way this time, I don't think it will affect 2008 tax returns/tax liability at all.

[Jeff In Milwaukee]

2. It factored into 2002

I'm a tax preparer, and I recall having to ask all my clients whether they received a tax refund the previous summer.

In the case of 2001, the "prebate" came as a result of lowering the lowest tax bracket from 15% to 10% for Tax Year 2002, which really did reduce people's taxes. So the check you received that summer reflected that reduction. But the "prebate" was deducted from your 2002 refund accordingly.

I'm still not clear if there's going to be a one-time rate reduction, or if they're doing something else -- like I described in the OP.

Here's the thing -- If the "prebate" is just going to be taken out of you 2008 refund with no other adjustments made to the tax tables, then this whole thing is an even bigger sham than the last one. In which case, I'll advise my clients to aim for the smallest refund possible (or even small balance due) to get the maximum benefit.

Edit: I misspoke (mistyped). It factored into the 2001 Tax Return -- Line 47 was the "Rate Reduction Credit" and you did have to offset your credit by the "advance payment" your received.