The Latest Information on Upcoming Refund Checks
Brief Background on Refund
The Economic Growth and Tax Relief Reconciliation Act of 2001, which was signed into law on June 6, 2001 created a potential refund for individual taxpayers. Although most provisions of the act are not effective until future years, the split of the current 15% brackets into new 10% (aka, initial bracket amount) and 15% brackets is effective as of July 1, 2001.
The Act added IRC Section 6428 which created a one-year tax credit for 2001 up to 5% of the initial bracket amount. It also provides that this credit provision be calculated in relation to the individual's 2000 income and that any credit so calculated will be refunded in 2001 rather than taken as a credit on the 2001 return. However, upon calculating the tax credit for 2001, it is reduced by any refund received. Basically, the refund is calculated first and is then used to reduce the available credit when the 2001 return is filed. Thus, if you receive the maximum refund, the 2001 credit is reduced to zero, but not below zero. The act also provides that the credit can not be paid after December 31, 2001, so if an individual has not filed their 2000 return yet, it is essential that it be filed as soon as possible, particularly if they have 2000 tax but expect no 2001 tax. Otherwise, they will only be able to calculate the credit when their 2001 return is filed.
The Act left the tax brackets intact for 2001, but the tax rate in each of the brackets above the 15% bracket is being decreased by 1/2 of 1% for 2001. For years after 2001, except for the 10% and 15% brackets, the brackets are widened each year through 2006 and the rate for each bracket is reduced slightly every other year through through 2008.
The above is just a small sample of the tax changes provided by the Act. The provisions of the Act are numerous and professional advice is advised for all but the most simplest of circumstances.
Who Will Be Getting Refunds?
Only those individuals who had a tax liability on their 2000 Federal Income Tax Return and can not be claimed as a dependent of another will receive checks.
However, if you did not qualify for the refund or only qualified for a partial refund, you may still be eligible to claim the credit on your 2001 Federal Income Tax Return if you have a tax liability for 2001 and you are not claimed as a dependent of another.
When will I get my refund?
The law provides that the Internal Revenue Service is to make these refunds as quickly as possible in order to have the task completed by October 1, 2001. No refunds will be paid after December 31, 2001. It is projected that refund checks should be received by taxpayers beginning in the week of July 23. Individuals who filed their returns on or before April 15, 2001 should receive their refunds prior to October 1, 2001. The timing of these refunds will depend partly on the last two digits the taxpayer's Social Security number (SSN) with individuals with lower numbers receiving their checks first. For example, if your SSN ends in 00 through 09, your check should be received the first week, 10 through 19, the second week, and so forth.
I have not filed my 2000 return yet or filed it after the normal due date. What happens to my refund?
Depending of when you actually file your return, you will either get a check later or have to file for credit on your 2001 form. Refunds for returns filed after April 15, 2001, will be processed after the returns which were filed by April 15, 2001. You need to be sure you file your 2000 return as soon as possible but definitely by the extended due date to be eligible for the refund. For returns filed after April 15, 2001, refunds will be provided as expeditiously as possible, but it is projected that these refunds will not be issued until after October 1, 2001. However, due to the December 31, 2001 cut-off date for refunds, if you have not received your refund by then, you will most likely have to claim the available credit on your 2001 return in order to benefit from this provision. CAUTION: If you owe taxes on your 2000 return, DO NOT hold out the projected refund from your payment. If you do, it will be treated as an underpayment of tax and you will be subject to penalty and interest on the amount not paid.
What do I have to do to get my refund?
You should have to do nothing. If you filed your 2000 return by April 15, 2001, the government will send you a letter in mid-July telling you whether you qualify, how much you will receive and how soon you will get a check. Be sure you keep a copy of this letter. Taxpayers not eligible should also receive a letter explaining why. For those filing after that date, you will receive a letter as expeditiously as possible, but probably not before October 1.
How much will I get back?
Your refund will be based on your filing status and tax liability. The following chart provides some general guidelines.
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Single, or Married Filing Separately
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Head of Household
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Married Filing Jointly or Widow
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5% of first $6,000 of 2000 taxable income -- a maximum of $300.
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5% of first $10,000 of 2000 taxable income -- a maximum of $500.
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5% of first $12,000 of 2000 taxable income -- a maximum of $600.
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I still owe on my 2000 taxes. What happens to my refund?
Any refund that would be due to you will be applied toward any outstanding debt due the government, including income tax and student loans, as well as past-due child support payments. You will receive a check for the difference if the refund is more than what you owe.
Can I have my refund direct deposited into my bank account?
No. All checks will be mailed to the address on the most recent tax return filed. If you have moved, it is recommended that you notify the U.S. Postal Service and the Internal Revenue Service of your change of address.
If I do not get the full credit for 2000, can I get more for 2001 taxes?
Maybe. It depends on your 2001 income. If your taxable income for 2001 is higher than your taxable income for 2000, you can claim an additional credit up to the difference between the maximum refund allowed based on your filing status and 2001 taxable income and the amount of the refund you received. For example, if you are Married Filing Joint taxpayers, and your 2000 taxable income was only $10,000, you should receive a $500 refund for 2000. If your taxable income for 2001 increases to $12,000, you would be eligible for the additional $100 (5% of the $2,000 difference in income) as a credit on your 2001 return.
Does this provision work in reverse? What happens if my income for 2001 is lower than my 2000 income? Do I have to repay the refund?
No. Once your refund for 2000 has been correctly calculated and your refund received, you will not lose any of it if your 2001 credit calculation is less than the refund you received. The Act provides that the credit is reduced by the refund, but not below zero.
What do I do if I don't receive my check by October 1st?
Call 1-800-829-1040 (toll free) to check on your refund, but do not call until after October 5th. IRS will not be set-up to track the refunds until then.
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The above is presented for informational purposes only and is not intended to present a complete explanation of the law as written or applicability to any specific individual. For assessment of your individual circumstances, please contact us for a complete analysis.
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