How Will The Stimulus Check Stimulate You?
In an effort to rapidly boost our flagging economy, the federal government will be sending out the first stimulus checks four days early. So, for those of you who kited your tax payments, this is probably good news.
For some, well, it’s still a waiting game for those who view such things as “rebates” rather than ploys. If you’re in that group, well, you’re probably praying your check will be here in time to take advantage of the discounts retailers are offering.
And you are the precise reason why the government thinks this is such a good idea.
For others — and this includes the Venomous Household — it feels like a shady back-room deal. We wrote a hefty check to the IRS and now they’re writing one to us a bit later. Oddly enough, the amounts aren’t that different.
That makes our decision about how to spend our stimulus check pretty simple: it’s already spent. We paid it once toward a debt with the IRS and when we get that money back, well, we’ll pay it toward another debt… most likely our highest-interest credit card.
Yes, we’re aware that’s not what the idea was behind the whole thing. But then again, we don’t actually understand the fine economic distinction between receiving money from the IRS after having paid them nearly the same amount and, say, “robbing Peter to pay Paul”.
Sure, we’d like to spend that money on a nice big HDTV or a family vacation or even a new tile floor for our kitchen. But, really, isn’t that kind of “screw the budget, I want stuff!” thinking what led to the supposed “mortgage crisis” in the first place?
How about you? What will you be spending your money they shouldn’t have made you pay “stimulus check” on?
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My family is attempting to become debt-free and also build a 6-month emergency fund. We recently made a very large payment towards our debt, so we plan on putting the rebate towards the 6-month emergency fund. Our tax refund went towards repairing things around the house - like our busted water heater.
Having an emergency fund like that is a brilliant financial move, Jaynee!
We will not be spending ours. We will put it in the bank until such time the government wants it back.
Bryans last blog post..Penny Postcards
LOL. Now that’s an ironic turn: taking money from the government and making interest on it rather than vice versa.
We just paid off our last debt in February, so we were going to just add it to our emergency fund.
But, I have been saving for a laptop so that I can spend some more time earning money online (and working on my blogs). Our computer is in our living room, so I have no privacy. Plus, I want to be able to go out, like to the library, and work. So, we might use some of the stimulus payment to buy that ahead of schedule.
The rest will go into savings.
Charitys last blog post..In Vermont Politics…
Dell has some killer deals on XPS™ Laptops
right now.
Like you, I’m paying down a debt, not buying anything extra that I really can’t afford.
Kats last blog post..The love the baby moods.
Yep, it seems contradictory to me that we’re being encouraged to “splurge” while also being warned against the perils of over-spending.
Grrr… It’s not a stimulus check. It’s not a rebate. It’s certainly not a refund. The best definition for it would be a payday loan advance. Really. The all-powerful, all-wise gubbermint is advancing you money from next year. You will owe income tax on the amount you are being fronted. And the government financed this stunt by borrowing money, itself. I wonder if they will forgive the penalties for under witholding if the “advance” helps you break the threshold?
Jeffs last blog post..Excellent Customer Service
You won’t owe taxes on the check. (See below.)
I don’t get the issue. The Gov always takes our money and then returns some of it. This time they’re returning some of it early. The time value of money is a good thing, no?
Oh, I’ll be buying a gun, of course.
Umm, no. In the best of all value/money equations, come tax time, you would owe the government nothing and the government owes you nothing. Zero balance. Best would be no taxes ever, but that is not likely. These “stimulus checks” are not even tax refunds. In literal terms, the government is advancing you money that you will earn at a later date. You will have to pay tax on this money. It’s actually a compulsory “loan” with the interest being the taxes owed.
Good choice on the gun, though.
Jeffs last blog post..No Time For You!
Again, you won’t be taxed on the “stimulus check”. (See below.)
You’re correct in saying that it’s actually a loan, but it’s technically one the government’s taking out.
The money to fund the checks comes from the U.S. government borrowing against 30-year bonds and T-bills that won’t have to be paid off for some time. In other words, the funds we get today are essentially mortgages on our children’s futures.
I never planned to have this money anyway. When it shows up, it will be donated to a worthy cause.
I’ll be happy to nominate myself as “worthy”. ;P
A trip back to Tennessee to see my family, I guess. It’s been a year and a half since we’ve seen them. Either that, or I’ll max out my Roth, and use next year’s refund to make the trip. We haven’t decided, as both are equally important to us.
Jeff, I’m afraid I don’t understand your logic. A Payday advance, to me, says “It’s ALL going to go back to the government.” Then you say “You’ll owe taxes on this,” which leads us to believe it’s actually just counted as income.
Which is it?
Distrust of the government is healthy, but conflicting info and FUD are unnecessary.
bens last blog post..The state of Free Expression
It’s a bit of both. You will owe taxes on this stimulus check. But those taxes will be due along with the rest of 2008 taxes on income. I used the payday loan advance as a metaphor. The government is advancing you some money as income. If your income for 2008 is $40,000 and your stimulus check is $600, then your taxable income for 2008 will be $40,600. I’m not going to cogitate all the various deductions and exemptions.
Yes, you get some money for “free” (the $600, less the taxes you will owe). But it’s not really free is it? We all pay for government handouts through taxation. Wouldn’t it be better to just cut taxes to begin with?
Jeffs last blog post..No Time For You!
You won’t owe taxes on the check, Jeff.
Aside from that, I agree with the principle that this is little more than a ‘correction’ of over-taxation.
About half of ours is going towards our daughters gigantic dance bill. The rest will probably go towards credit cards, we are also trying to get out of debt.
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Yea its kinda strange I have to pay fed and state and they turn around and send me my own money back,oh well I think I will get a new pickup since diesel is soo high the dealers should come way down on the price and if they dont I will just put it in the bank, at least enjoy some of the money Kate
The government needs to quit taking our hard earned cash and let us invest it ourselves instead of them squandering it on things that we don’t agree with.. after all it is our money we should do with it what we want right? I say less government and more money the more they stay out of my life the better after all I am an adult and I do not need a nanny.
But the government just gets bigger and takes more. I am all for paying for protecting our country but I am not for giving my hard earned cash to someone who comes here illegally and wants me to speak their language. This is America if you come here, come legally, learn the language and support yourself. That is what my grandparents did and they did not get any handouts either!
I’ll step off the soap box now… Sorry (sheepishly)
Oh yeah, I think I already spent it on an espresso machine.
Tai-Tais last blog post..HA! I knew it!
Somehow, I knew that this would drop into a political melee. A few points for feeding the flames…
Aiming toward an income tax refund every year is just plain silly. Why on Earth would you want to give the government a tax free loan every year? Because you lack the fiscal discipline to actually save money yourself?
The US is not a democracy. It’s a republic. As such, our leaders do what *they* want in our best interests. Oh sure, they are supposed to listen to us and heed our counsel, lest they not get re-elected, but we all know how that works out.
Less government is a noble goal (and one that I support). But how the hell are you gonna get there when you keep electing folks from both sides of the aisle who build more of it, not less?
As for the language thing, I understand the sentiment. But I do not think there needs to be a law about it. If you come here legally and want to place yourself at a disadvantage by not being able to communicate, it’s your problem not mine. Just make sure that you come here legally.
Jeffs last blog post..WAR en Mexico!
The stimulus checks (which I’m calling them because, well, that’s what they’re called) ARE NOT SUBJECT TO TAXATION at least according to the IRS today:
http://www.irs.gov/newsroom/ar.....81,00.html
Q. Is my Stimulus Payment taxable?
A. No. You will not owe tax on your payment when you file your 2008 federal income tax return. But you should keep a copy of the IRS letter you receive later this year listing the amount of your payment.
Q. If my Stimulus Payment is not going to affect my 2008 tax refund or increase the tax I owe next year, why is it I need to retain the letter that lists how much I received?
A. In the event you do not qualify for the full amount on your 2007 return but you do on your 2008 return, you will need to have the letter as a record of the amount you previously received. [New 4/11/08]
It is my understanding that we will not owe taxes on the stimulus payment.
So please help me understand how this is a “payday loan,” Jeff.
Lifted from here: http://www.irs.gov/newsroom/ar.....81,00.html
Please, I’m not being snarky, I wanna know.
Thanks.
Margis last blog post..My brief hollywood observations
We’re getting the front seat passenger seat belt repaired (it was locking even when not moving) and paying the deductible on the body work that’s necessary since someone hit the truck when it was in the parking lot at Dunkin Donuts in January. The rear driver’s side quarter-panel and the back bumper need complete replacement. Since the truck was drivable and is four wheel drive, we were waiting until the chance of snow was negligible to have the repair work done.
I usually get plants for the garden for Mother’s Day/wedding anniversary (5/9) and I would like a new sewing machine this year if I can talk hubby into it…
kimschs last blog post..Selected, Not Elected
Thanks, Kate - I posted a comment only to have it eaten by the ether.
I posted the same thing you did to Jeff - directly from the IRS website - and I think the URLs is what caused me to get “etherised.” LOL
Thanks for the clarification. I admit to being a Tax Law Dummy, but I can read and I thought those FAQ were pretty clear.
Margis last blog post..My brief hollywood observations
At first, the IRS had stated that the checks were taxable. I guess the situation has been revised and for that I do sincerely apologize. I would still have preferred to pay less tax in the first place.
Jeffs last blog post..Mama Don’t Take My Printer Away
Oh, hell, yeah. After writing a $2800 check while knowing we’ll be getting back $1800 of it in June I’d have preferred to have paid less, too. (I can’t, for instance, afford to go visit my mother who’s going through chemo for Stage IV cancer this month because we’re too short on cash. Two months from now.. assuming she’s still okay… I’ll be able to afford it if only because I can at that point choose not to appl;y that “stimulus check” toward our credit card bills.)
That chaps my hide.
However, YOU just scored big, BIG points for having the balls it takes to say “Hey, I was mistaken.” After all these years I know *you*, and I know you aren’t an unreasonable guy, so I shouldn’t be so surprised. But do you have any idea how rare it is for someone to say something like that???
You rock.
The Government knows that if they just discounted the amount you owe that there’s no way that you would look at that $1800 as FREE money to go spend and STIMULATE the economy.. By delaying the receipt of the funds you now look at this money as new found money that you weren’t expecting and they hope that you will spend it and therefore circulate money into the economy.
I think you’re right. Our initial plan to use it to pay down credit card balances has been OBE thanks to how freaking tight money is these days. Now, instead of using it to get out of debt, we’ve got to use it to avoid incurring debt on our trip next month to see my Mom.
I was wrong. And while I do understand that it may be common for folks to walk away from their mistakes, that’s just not my way (or the way of my kids). I screwed up and used old information. I was corrected and now we are all smarter. I call it a win/win.
So I guess I need to come up with a new metaphor. Cripes. How about this: You got to Home Depot and by some ridiculous washer and dryer combo because your old ones have crapped out. You nearly have a heart attack at the cost of these things. But you buy because you have to have them (there’s teenagers in the house!). A few months later, you get a piece of mail from Home Depot thanking you for your huge expenditure and, oh, here’s a $200 rebate. Wouldn’t have just been easier to pay less for the damn things in the first place?
Jeffs last blog post..The Road To Hell
We’ll probably squirrel it away in anticipation of next winter’s heating bill. It gets cold up here! I don’t even want to think about how much heating oil will cost next January.
Best wishes in your quest to become debt-free. We paid off our mortgage last summer and are now completely debt free. It’s a very powerful feeling!
Roses last blog post..On the trail today
I’ll put it in the bank, I suspect in about 2 years I will have to buy a new car and that will be just some more money going towards it.
I will be spending my small sum of money on a bicycle, since gas just went up another 16 cents here making it 3.70 a gallon. If they really wanted to stimulate the economy they should tap into Alaska’s oil reserve and steady this ever increasing price per gallon. Then I would spend my stimulus towards a down payment on a Hummer so I could give my part to global freezing.