"Deal or No Deal - Government Style"
Ever imagined yourself on the popular television show, Deal or No Deal? Like show contestants, you may soon have some unanticipated cash to deal with.
Why?The government believes there is increasing evidence the economy faces a high risk of recession.
Their answer?The Economic Stimulus Act of 2008.
To be effective, an economic stimulus package must direct money to those who will spend it quickly, boosting consumer demand and prompting increased production and economic growth. Tax rebates more closely target cash-strapped middle-class and aspiring middle-class Americans, who are more likely than wealthier people to immediately spend the money, rather than saving it. The Act includes seniors living on Social Security and veterans living on disability benefits to compound the stimulative impact.
Article by Claudine Konrardy, Sr. Vice President of Operations at Pioneer Bank
According to the official web site of the IRS, www.irs.gov, starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million households. To receive payment, taxpayers must have a valid Social Security number, $3,000 of income, and file a 2007 federal tax return. 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. Many people who were usually exempt from filing a tax return must do so this year in order to receive a stimulus payment - for those individuals, the law provides for a minimum payment of $300 for singles and $600 for couples filing jointly.
The government is encouraging you to spend the rebate as quickly as possible. But, what if an inner voice is telling you to save, not spend it?
Before you decide to save or spend, consider these facts.The number-crunching folks at the U.S. Commerce Department dished out some discouraging news recently, saying Americans spent more than they earned in 2005- a negative savings rate of 0.5 percent for the year. That's the first time that's happened since the Great Depression. If your savings rate is negative, it doesn't necessarily mean that you don't have any savings. It means you're spending more than you earn, so you're dipping into your savings or you're borrowing to pay for purchases. Our savings habits have been doing a gradual slide since May 1985 when we saved 11.1 percent of our disposable income. We might be putting money into 401(K) and IRA plans, but we're spending all our other income, plus taking equity out of our homes. For some reason we've gotten away from feeling that saving is our responsibility.
Now that you have the facts, imagine Howie Mandell asking you - “Deal or No Deal?” Spend or save? My hunch is taxpayers will do what is normal for them - spenders will spend, savers will save.
The IRS tells us identity thieves are already pushing scams involving the rebate payments. Their goal is to trick people into revealing personal and financial information such as Social Security, bank account and credit card numbers, which the scammers can use to commit identity theft. Don't be a victim- visit www.irs.gov for information on the most recent scams.
Visit our identity theft web page for more tips to protect your money and good name, including a brief list of popular fraud scams.
Disclaimer: This article should not be relied upon as a substitute for independent research or professional tax advice.
