The Economic Stimulus Act of 2008 has provided working families with a boost to help with soaring costs. The purpose is to reduce the effects of recession. The payments we received certainly are helpful. However, will we be taxed on these payments?
The Internal Revenue Service normally requires that you report all income that you receive. While some protected funds may be free from income tax, most other sources of income are taxable.
The IRS has issued the following statement regarding the stimulus payments:
You will not be required to report the amount of your stimulus payment as taxable income on your 2008 federal income tax return.
This is great news, since it can help families use the entire payment now rather than have to worry about saving a portion to cover anticipated income taxes.
The IRS has also commented on the effects of stimulus payments on eligibility requirements for government benefits or social programs. Many of these programs require that recipients remain below certain income levels or savings levels in order to qualify.
The IRS has addressed this concern, although they have not completely settled the issue:
If you receive any federal benefits or federally financed benefits, those benefits generally will not be affected by any stimulus payment you receive.
Please note that this statement does not include state sponsored benefits. It is up to individual state governments to exempt recipients of state funded benefits from stimulus payment impacts on income and on savings.
If you receive such benefits, you may wish to consider contacting the appropriate agency that issues the payments to you. Make sure that there are no restrictions on how you use the stimulus payments, such as putting it in savings.
Tags: stimulus payment, taxable income
A great informational site for small business owners http://www.section179.org interested in the Economc Stimulus Act impact on their busienss.