I hope most of you have received your economic stimulus payment by now ($600 for singles or $1,200 for married couples, as well as $300 per qualifying child born after December 31st, 1990) unless, of course, you were one of the minority of individuals/couples that received a reduced payment, or, maybe, none at all. If you received a reduced payment, it may have been because of one of the following reasons:

• You are single and your net income tax liability is less than $600
• You are married and your net income tax liability is less than $1,200
• You are single and your adjusted gross income (AGI) is more than $75,000, or you are married filing jointly and your AGI is more than $150,000
• You owe back taxes that reduced your payment
• You have non-tax federal debts such as unpaid student loans or child support obligations that reduced your payment.

Unfortunately, I can’t help most of these folks that received a reduced payment or no payment due to income limitations, but I do have some good news for them if 2007 was an unusual year in terms of income generation. What most Americans don’t know is that within their 2008 tax return there will be a reconciliation process that may allow folks that did not receive a rebate in 2007 to collect one in 2008.

Here is how it works: 2008 tax filers will compute a Recovery Rebate Credit which will be reduced by any economic stimulus payment they received in 2008. For most, this means the two will cancel each other out, and there will be no tax effect. However, for some, the stimulus payment received in 2008 will be larger than the computed credit due to improving financial conditions. (And don’t worry - those individuals will not have to repay the difference!) Lastly, there will also be individuals whose computed 2008 credit will be larger than the stimulus payment they received in 2008 (if any), and these are the individuals that will be eligible for a benefit in the form of a reduced tax liability or increased tax refund.

Since most of the high earning individuals/couples will continue to violate the income limitations in 2008 (same as 2007, stated above), they will be denied the credit. However, for the individual/couple whose income situation is measurably reduced in 2008 due to changing jobs, retirement, etc., this could be your chance to recover the costs you were hoping to attain this year.

Joe McCarthy is Assistant Professor of Accounting and Finance in the MSL program at Roberts Wesleyan College. He is a certified management accountant and holds an MBA from St. John Fisher College. Joe’s areas of expertise include budgeting, cost analysis, and allocation; financial accounting and reporting; personal finance; and tax planning and preparation. In addition, Joe is owner/operator of McCarthy Financial Services. He may be reached at 585.594.6139 or mccarthyj@roberts.edu for additional questions, explanations, or analyses regarding financial information.