Take note of 2008 tax return quirks

By: Carol Hazard | Times-Dispatch
Published: March 01, 2009

Effects of life-changing events on income taxes

Taxes: Q&A

Tax breaks in stimulus plan

You may run into a few quirks when you do your 2008 tax return.

Remember the rebate check -- aka the economic stimulus payment -- that you received last spring? It's creating confusion among taxpayers, so the Internal Revenue Service put out a bulletin in response to errors showing up in early tax filings.

Some people are confusing their regular tax refunds with the stimulus payment. Those errors can cause delays up to a week in getting refunds.

Remember this: You don't have to report the rebate check as income. For most taxpayers, the correct entry on Form 1040 related to the rebate will either be blank or zero.

You won't need to repay any of the rebate, said Jim Young, who organizes free tax-preparation sessions with AARP volunteers and taxpayers at the Tuckahoe Area Library in Henrico County.

However, you may be entitled to more money than you received in your rebate check, if your circumstances changed last year, he said. For example, if you had a baby last year, you would get an additional $300.

If you bought your first home last year, a nice perk arrived in the first stimulus package, which was passed last fall -- a credit of 10 percent of the cost of a house up to a maximum $7,500. The credit needs to be paid back over 15 years.

But an even better credit arrived in the new stimulus package, approved Feb. 17.

First-time homebuyers get an $8,000 credit if they buy a home this year before Dec. 1. The credit does not need to be paid back, provided the buyer stays in the house for at least three years. The credit can be applied to 2008 returns, according to a change in the tax law, or to 2009 returns.

If you bought a house last year on Dec. 31, you could claim the first credit. If you had waited a day, you could qualify for the better credit. Congress probably will make up for the difference, Young said.

Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.