Entries Tagged 'IRS Stimulus' ↓

I blogged on savvywallet.com in May about the IRS Stimulus Payment and thought I’d post a follow up.

I pulled the following from MediaPost.

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Awhile back, we wrote heavily on the Economic Stimulus of Act of 2008. According to a statement issued by the Internal Revenue Service on July 21, 2008, the IRS is sending an estimated 5.2 million more letters to people who are still eligible to receive a check.

Currently, 112 million taxpayers  have received their checks, totaling $91 billion. The IRS speculates that the 5.2 million taxpayers who haven’t received checks are veterans and retirees. The IRS wants to give them one last chance to receive their checks.

Anyone who is eligible for a check has until October 15th to file a personal tax return. After that date, they forfeit their right to a check.

The question is, if the money was to stimulate the economy, and only a percentage of the checks are being received, how much stimulation will we see from the Economic Stimulus Act if the monies aren’t entirely distributed? What is the IRS going to do with the billions of dollars in stimulus checks that aren’t received? Will they be donated to charities? businesses? families?

Thoughts?

Since starting this blog, I’ve been following certain sectors of our economy and seeing how they apply to our business and our lives. It really started with The Sharper Image bankruptcy. Since then several retailers have filed, and thousands of people have lost their jobs. As I checked the morning news, it was sad to see the business section littered with news with more news of the recession.

The nation’s unemployment rate went up 5.5% in May. It’s the biggest rise since 1986, and around 49,000 jobs have been cut. Also, due to the troubled housing market, credit and financial sectors, employers have now cut payrolls for five straight months. Unemployment grew by 861,000 rising now to 8.5 million– a year ago was 6.9 million.

At the same time, oil prices keep rising — too a peak to $134.75 a barrel on Friday– a rise as much as $6.96. Much of the country is already seeing oil around the $4 range. In Orange County, CA, we’re seeing about $4.40 for regular unleaded and $5.40 for diesel.

What does this mean for you?
With high energy and food costs, our paychecks aren’t going as far as we’d like. Even with the $168B stimulus, we still won’t see the effects till the end of the year. So brace yourself, this could be a bumpy ride. As for me? I’m going to watch my spending habits and start tackling my finances. I don’t know exactly how to get out of this stump, but maybe I should hold off on buying that new car.

I know I’m not alone when I say my wallet and bank account nod a vigorous “yes” in answer to this question.

However, the answer is not as simple as it may seem at first glance.

I found myself reading financial news this morning – something of an unusual occurrence – because for the first time in my life I’m feeling the effects of the economy on my pocketbook. What I found out about the current state of our economy, as well as what improvements or changes I can expect in the future, took me somewhat by surprise.

Allow me to begin with the classically accepted definition of a recession: A decline in economic activity (Gross Domestic Product) that persists for at least two quarters.

We’ve all felt the effects of staggeringly high gas prices, the disaster that is the mortgage industry, slow home sales and deepening loan losses, so it’s no wonder a recent Gallup poll found that three-quarters of Americans think the US is most certainly in a recession, despite the fact that we have not yet had two successive quarters of negative economic growth. The study also found that “a majority say it is at least somewhat likely that the country will slip into an economic depression.”

I don’t know about you, but I’m sick and tired of getting nothing but bad news about the state of our economy, so have no fear, as I do believe I’ve found us some good news:

Yahoo! Finance reports that (are you ready for this?) we are not currently in a recession! Despite what many economists are predicting, our overall domestic growth has not yet turned negative– I’m sorry, what? Although some retail sales (i.e. automobiles and department stores) are down, there are also retailers that have been seeing increases in sales. For example, general merchandise stores such as Wal-Mart and TJX.

Aside from the economic stimulus package that you’ve all no doubt heard about (and maybe already received a check from), the government is making some very definitive moves to get our economy out of this slump. For example, in an effort to lower gas prices, CNN reports that the Senate voted 97-1 to stop filling the Strategic Petroleum Reserve for a full six months, which means we can soon start saving up to 25 cents per gallon in the not-so-distant future! The Federal Reserve also launched an aggressive campaign to cut interest rates to help boost an economy in the throes of a credit crisis, but is taking necessary measures against creating unnecessary inflation.

All in all, as much as we would like to hope for the best, I believe we should always plan for the worst. My advice is to continue to be a savvy consumer – find ways to maximize your pennies today so you won’t need to be pinching them tomorrow!

That may be a question many analysts are asking about tax rebate checks, though a new survey finds that many families are planning to do both when the checks are distributed.

Starting in May, the treasury is sending economic stimulus payments to more than 130 million households. (Find out when you’ll get yours here)

To receive a payment, taxpayers must have a valid Social Security number, $3,000 of income and file a 2007 federal tax return. “The IRS will do the rest,” said Acting IRS Commissioner Linda Stiff. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17. Millions of retirees, disabled veterans and low-wage workers (who usually are exempt from filing a tax return) must do so this year in order to receive a stimulus payment. Visit IRS.gov for more details. While you’re there, be sure to read about rebate scams and how to protect yourself.

According to a new National Retail Federation survey, conducted by BIGresearch, consumers plan to spend 40.6 percent of tax rebate checks, which will provide an immediate $42.9 billion boost to the economy. The survey also found that the $105.7 billion distributed in tax rebate checks will be used to pay down debt ($30.0 billion), saved ($19.8 billion), invested ($4.4 billion), and used to pay down medical bills ($4.6 billion).

Wall Street is predicting a repeat of the 2001 tax rebate spending data. Big-ticket items, such as cars, air travel, home improvement, furniture and pleasure boats, got little if any boost. “The 2001 rebate was spent on small stuff,” Merrill Lynch economist David Rosenberg noted. Stuff like movies. Books. And eating out at inexpensive restaurants. “Destressing activities that diverted attention away from the recession,” according to Rosenberg. Other major beneficiaries were staples, such as drugs and sundries.

Sooooooooo, what to do with all of that money? The people in my office have been standing around our broken water cooler (a story for another day – it’s funny, I promise) debating this very question. Most feel very strongly about doing the right thing – which, of course, is spending vs saving. Right away. In fact, most of us have already spent the money in anticipation of receiving the rebate. And at least one of us has managed to spend the money more than once. We are a patriotic people.