How Do Tax Rebate Checks Work?
- A tax rebate is refund or forgiveness of taxes owed to the federal government which is payed back to taxpayers in the form of a rebate check. While this general definition encompasses any payment for taxes paid back by the government, more recently, a distinction has grown between the term tax rebate and tax refund. This distinction comes as the result of the special economic stimulus package in 2008, which doled out what were termed, tax rebate checks, to many taxpayers. As a result, a tax refund check usually refers to a normal tax refund that may come each year, while a tax rebate check may refer to any special tax forgiveness above and beyond normal yearly refunds.
- A normal tax refund is a check the government pays back to a taxpayer after taxes are filed in the event that the taxpayer's tax liability is less than the amount of actual taxes paid. Tax refunds are extremely common amongst middle class workers, since they are usually paid wages which automatically have taxes deducted. The government typically deducts enough taxes with these automatic payments that wage earners rarely have to pay more to the government, (unless they have other significant sources of income) and commonly too much is deducted, which is refunded at the end of the tax season. Self employed workers who must pay estimated taxes throughout the year will also receive refunds for overpayment.
- The meaning of a tax rebate check benefited American taxpayers most recently during the economic stimulus plan of 2008, which gave out an emergency tax rebate of $38 billion to taxpayers. A similar rebate totaling $8 billion was issued in 1975 under president Gerald Ford. In both instances, rebate money was meant to inject capital into the economy that citizens would spend on consumer goods, which would act as a jump start of economic activity and avert recession. Under the 2008 rebate plan, checks of $600 were cut for people making over $3000 and under $75,000 (rebate amounts were phased out above this amount) with an extra $300 allowance for each dependent child. Subsequently, further tax rebate checks have been considered to assuage economic hardship; the term tax rebate is likely to remain tied to such emergency stimulus funds, while tax refunds connote a correction of overpaid taxes.
