7 Misconceptions About the Stimulus

by Kimberly Lankford

Since President Obama signed the economic-stimulus package into law February 17, I have received many questions about its provisions. And I've noticed that there are a lot of misconceptions about the plan. Here's the lowdown.

Misconception #1: Most people will get their stimulus money as a check this year.
Instead of receiving a check from the government, most single taxpayers will see an adjustment to their tax withholding in their paychecks in 2009 and 2010, giving them about $45 extra per month for the rest of this year (married workers will receive an extra $65). If you're self-employed, you can adjust your quarterly tax payments to benefit from the tax credit. Then you will claim the credit when you file your 2009 tax return next spring, bringing your tax bill in line with your reduced payments.

The stimulus also provides a one-time payment of $250 to recipients of Social Security, Railroad Retirement and Veterans Administration benefits.(People who applied for any of these benefits for the first time after January 31 don't get the money; only those on the rolls in November and December 2008 and January 2009 are eligible.) You'll get the money electronically or by check, depending on how you receive those benefits. Retired government employees who don't receive Social Security will also get a $250 credit when they file their 2009 returns.
Misconception #2: The adjustment to withholding will have to be paid back when you file your tax return next year.
Wrong -- the stimulus is actually a tax credit of 6.2% of taxable wages in 2009 and 2010, to a maximum each year of $400 for single taxpayers and $800 for married couples filing jointly. The credit is refundable, which means that you can still receive the full credit even if it is worth more than your total tax liability.
Paychecks are being adjusted now to get more money into the economy faster. You'll claim the credit when you file your return next year, so your tax bill should adjust in line with the stimulus money (and you might get some extra money at tax time if your withholding wasn't adjusted enough to account for the extra credit during the year, which may happen for some married people in single-earner households).
But not everyone qualifies for the credit. It begins to phase out for single filers with adjusted gross incomes of $75,000 or higher, or $150,000 for married couples filing jointly, and it disappears entirely for single filers with AGIs of $95,000 or more, or $190,000 for joint filers.
Misconception #3: The first-time home buyer's credit needs to be repaid.
You may not have to repay the credit, depending on when you bought the house.
If you buy a house between January 1, 2009, and December 1, 2009, you could receive a credit for 10% of the home's purchase price, up to $8,000. This credit does not have to be repaid as long as you own the home for at least three years.
If you bought a first home between April 9, 2008, and December 31, 2008, you are eligible for a tax credit of 10% of the home's purchase price, up to $7,500 -- but the credit must be repaid over 15 years, starting two years after you claim the credit. If you sell the home before you finish paying back the credit, the balance is due in full the year of the sale.
The 2008 and 2009 credits begin to phase out if your modified adjusted gross income is more than $75,000 (or $150,000 if you're married filing jointly). The credit disappears entirely after your income reaches $95,000 if you're single, or $170,000 if married filing jointly. You are considered a first-time home buyer if you (and your spouse, if you are married) didn't own a primary residence in the past three years. The credit does not apply to rental property and vacation homes.
Misconception #4: You can't get the 2009 first-time home-buyer tax credit until you file your tax return next year.
Actually, taxpayers who buy a first home in 2009 do not need to wait until they file their 2009 return (by April 15, 2010) to benefit from the credit. To get the money into the economy faster, the federal government is giving you a choice of claiming the first-time home-buyer credit on either your 2008 or your 2009 tax return.
There's actually a way to benefit from the credit even before you buy your first home. If you plan to buy by the November 30 deadline, you can reduce your withholding on your paychecks right away. The increased take-home pay could help you with the down payment. File a new W-4 form with your employer to adjust your withholding. (And remember to re-adjust your withholding again next year.)
If you have already filed your 2008 return, you can use Form 1040X to amend it. If you purchase a first home after the 2008 tax-filing deadline of April 15, 2009, you can still claim the credit on your 2008 tax return either by requesting a six-month extension for filing your return (which doesn't extend the deadline for paying any taxes owed) or by filing an amended return.
Misconception #5: You need to apply through the government to get the COBRA health-care subsidy.
Contact your former employer, not the government, to take advantage of the COBRA subsidy. If you were laid off since September 1, 2008, and are already receiving COBRA coverage, then you'll pay 35% of the COBRA health-insurance premiums, and your former employer will pay the remaining 65%. The government will then reimburse your former employer for the subsidy through a payroll tax credit. If you were laid off on September 1, 2008, or later but didn't sign up for COBRA coverage, you'll get a second chance to elect COBRA and benefit from the subsidy. You should receive a notice from your former employer soon, or contact your former employer to find out about the steps for signing up.
Misconception #6: You can receive the COBRA subsidy the entire time you're covered by COBRA.
Federal law requires most companies with 20 or more employees to let former employees keep group health-insurance coverage for up to 18 months after they leave their jobs. But the 65% COBRA subsidy lasts for only nine months. After that, the premiums will jump back to the full price - and the average employer health-insurance plan costs $12,680 per year for family coverage, according to the Kaiser Family Foundation.
If you have health issues, COBRA may still be your best bet despite the hefty price tag. But many people can find a better deal by buying their own health insurance. You can get price quotes for individual policies at eHealthInsurance.com, or find a local health-insurance agent at the National Association of Health Underwriters Web site. Check out your options at least one month before your COBRA subsidy expires so you'll have plenty of time to find out how much an individual policy would cost.
The subsidy ends if you find a job and your new employer offers health-care coverage or you become eligible for Medicare. And COBRA does not apply if the company stops offering health coverage to current employees or shuts down entirely.
Misconception #7: The number of weeks you can receive emergency unemployment benefits has been extended.
The stimulus does not provide additional weeks of benefits for people who use their 33 weeks of emergency unemployment-compensation benefits; it just expands the dates that the program will be available. A federal law passed last year provides an extra 20 weeks of emergency unemployment compensation to workers who exhausted their regular unemployment benefits, plus an additional 13 weeks of extended benefits for residents of states with high unemployment rates (contact your state unemployment-benefits office for details about your state's rules).
The emergency unemployment-compensation program was scheduled to expire on August 27, 2009, and the last day to apply for benefits was originally set to be March 31, 2009. As a result of the stimulus law, unemployed people who exhaust their regular state benefits now have until December 31, 2009, to apply for extended benefits and can receive compensation until May 31, 2010.

How Stimulus Affects You...REALLY AFFECTS YOU

Here it goes, mi gentes. The truth about how the stimulus and so-called bailout will actually show up and affect each of us.

Provided by CNNMoney
Where the $825 billion will -- and won't -- show up in your life.
With our first glimpse into how the government wants to use $825 billion to juice the economy, it's clear that some of the money will quickly and directly affect most Americans lives, while other spending is intended to produce either longer-term, less tangible benefits or is targeted at narrow segments of the population -- like the unemployed.Although the sum is huge, the money isn't intended to turn the economy around, but to keep it from falling even further into decay.
Detractors say spending on stimulus will do little more than drive the country deeper into debt. Many Republicans are arguing for a plan heavier on tax cuts and lighter on government spending.But supporters -- including most Democrats and the president -- say it would ultimately cost the U.S. more -- in the form of lost jobs, economic output, and lost tax revenues - to drag our feet. They want the plan enacted quickly.Here's how some of the billions in the House stimulus bill could change your life.This is not a complete list of the spending, and the numbers are approximate and will likely change before any bill is enacted.
Your Paycheck: What You'll See:
$145 billion in tax cuts for working individuals.The tax cut would be $500 per person ($1,000 for a couple) and would phase out for people making over $75,000 a year ($150,000 for couples). You can get the money either by claiming it on your tax return, or through a reduction in the taxes that are taken out of your weekly paycheck.This is the largest single measure in a tax package that includes additional cuts for businesses large and small, as well as expanded credits for low income individuals.For the Unemployed:
$43 billion for increased unemployment benefits.$39 billion for expanded healthcare benefits for the unemployed.$20 billion to increase food stamp benefits.
Education What You'll See:
$41 billion for school improvements, including better buildings, computer upgrades and teacher training.$15 billion to increase the maximum Pell grant by $500 in 2009-10; plus, increases to the annual unsubsidized Stafford Loan limits.$14 billion in tax credits of up to $2,500 a year for college students with an annual income below $80,000.$6 billion for college building improvements.Behind the Scenes:
$79 billion to help states offset education costs. While people won't see this directly, it will likely mean that services won't have to be cut or taxes won't have to be raised.
Health Care What You'll See:
$4 billion for more preventative care programs.$1.5 billion for improvements at community health centers.Behind the Scenes:
$20 billion to computerize health care records. This is intended primarily for doctors, although there's some debate as to whether patients will have access to this database as well. Ultimately, it's supposed to make the healthcare system more efficient and cheaper for everyone.$87 billion for states to help pay Medicaid costs. Again, while not directly visible to most people, state taxes would likely rise, or services cut, absent this measure.
Housing What You'll See:
$6 billion to weatherize moderate income homes, making them more energy efficient.
$4 billion for homeowners to take up to 30% of the cost of conservation measures as a tax credit, up to $1,500 per person.$300 million for consumers to replace old appliances.$500 million to help rural families secure mortgages.For Those Living in Public Housing:
$16 billion in energy retrofits and improvements.
Transportation What You'll See:
$30 billion for highway and bridge construction projects.$10 billion for mass transit, including new lines, buses, trains and stations.$3 billion to expand congested airports.$1.15 billion for better land and sea ports.$4 billion for more police officers and equipment - best watch the speeding!$500 million for better airport screening detectors.
Other Infrastructure Improvements What You'll See:
$31 billion to modernize public buildings, making them more energy efficient.$3.1 billion for improvements on public lands, including new roads, trails and facilities at national parks.$6 billion for broadband Internet access in rural areas.$400 million for flood control efforts, which include buying and preserving open land around the country.$6 billion for communities to replace aging sewer lines.$4.2 billion for towns to purchase and rehabilitate foreclosed, vacant homes.$32 billion for a "smart" utility grid and renewable energy production, although in the long run this could change the way you use appliances at home and clean the air.$10 billion for science research facilities.

Copyrighted, CNNMoney. All Rights Reserved.

Brother can you spare a trillion?

Gotta spend some to get some: Obama economic stimulus plan may reach $1 trillion

WASHINGTON - Anxious to jolt the economy back to life, President-elect Barack Obama is considering a federal stimulus package that could reach a whopping $1 trillion, dwarfing last spring's tax rebates and rivaling drastic government actions to fight the Great Depression.

Full Story:http://www.msnbc.msn.com/id/28278398/