To be sure, the payment of the 2008 tax rebates has not been without delay or error. Then again giving out mass quantities of money is not especially the specialty of the IRS. This was only the second time in the history of the IRS that the agency had been called on by Congress to deal with the mass distribution of tax rebates, the first being in 2001, as a part of President Bush's 9/11 terrorist attack initiative known as Operation Economic Stimulus.
So, assuming there will be more economically stimulating tax rebates coming in our future, what might the IRS do to make them go more smoothly?
First-Things-First
In 2001, the IRS mailed the rebate checks (direct deposit was not an option then) between July 20 and September 21, well after the peak of the annual April 15 tax return and refund processing period. As a result, fewer errors and delays occurred. Still, over 295,000 rebate checks mailed out were returned to the IRS because of incorrect addressing. Many taxpayers moved after filing their 2000 tax return and failed to file change of address forms with their local Post Offices.
In 2008, the IRS tried to begin sending out the rebates on May 2 during the height of their regular April 15 income tax return and refund processing rush. Millions of tax returns from early-filers had already been completely processed and had to be re-opened to calculate the rebate, a process which as you'll see next, was not that simple. Million of returns were received on, near or even after April 15, compounding the rush, the confusion and the error rate.
In the future, Congress should better coordinate tax rebate timing with the IRS. With enough advance notice, the IRS could incorporate tax rebate qualifications, and rebate amount calculation information and worksheets into the standard tax return forms. Additionally, tax preparation firms and online tax filing providers could incorporate the tax rebates into their programs.
To do the Math, Keep It Simple
In 2001, the tax rebate payments were equal to 5 percent of a person's taxable income for the year 2000, with maximums of $300 for individuals, $500 for single parents and $600 for couples filing jointly. Pretty simple for both the IRS and the taxpayer to calculate.
In 2008, the tax rebate amounts were based on the filer's adjusted gross income (AGI), with the maximum payments being reduced by 5-percent of the amount earned above AGI income caps of $75,000 for single filers and $150,000 for couples. And, oh yes, you could get an extra $300 for each dependent child claimed, but only if the child was under 18, and you had to have at least $3,000 in "qualifying income," in order to get any rebate at all. Obviously not that simple even for the IRS to calculate, and even harder for taxpayers, who were often sadly surprised to get less money than they had expected.
The 2001 rebate plan made it far easier for people to know exactly how much they would get. While a completely "mathless" plan may not be possible, certainly a "less-math" plan should be considered for future tax rebates.
Don't Make Promises That Can't be Kept
In both 2001 and 2008, the IRS published what appeared to be hard-and-fast, date-specific rebate delivery schedules that were simply impossible to meet. As soon as the first delivery date passed, the complaints began. While a worthy effort, the IRS' "Where's My Rebate" web site too often failed to provide much help, simply adding to the frustration level.
For future rebates, the IRS should consider simply committing to a range of dates during which the rebates might arrive.
Just How Much and When
Basically, anything that would help people know, with a high degree of certainty, exactly how much they will get and when to expect it would go a long way toward making the next tax rebate a much more stimulating experience.
