Will The Economic Stimulus Payments Have To Be Paid Back


Will you have to pay the Economic Stimulus back?

Now that many have already received their economic stimulus payments, and have figured out what to do with it, I’m seeing a lot of questions asking “Will the stimulus payment need to be paid back?”

The quick answer is no. According to the IRS the economic stimulus payment is not taxable and will not reduce what you may be owed in a tax refund for 2008 (filed in 2009). In fact it’s possible that you get more back next year, if you didn’t already get the maximum, based on next year’s return. See the amount was based on your 2007 return so if you didn’t qualify for the full amount you may still qualify for the difference based on your 2008 return. Don’t worry if you received the full amount already. No matter what your 2008 return says you won’t have to pay anything back.

Now the the longer answer – You are going to have to pay back the economic stimulus payment! In some way, shape, or form we will pay that back. The money has to come from somewhere.

Let’s look at the ways in which the gov’t receives income:

  • Taxes (from income and corporate taxes).
  • Loans (in the forms of government backed securities such as bonds, bills, and notes).
  • Printing more money in the treasury.

Which do you think the money will come from? Printing money sounds like an easy way to find the dough but it’s not a policy the US uses due to the fact that more money creates inflation (Inflation is always and everywhere a monetary phenomenon – thank you Milton Friedman). And who wants even higher prices?!? We can issue more loans. Did you know that in 2006 we paid $406 Billion in interest payments on loans made to cover the national debt? Where does that money come from? See above. So that leaves us with taxes.

Yes, I believe we will be paying back the economic stimulus payments in the form of taxes. It may not be as one lump sum like we received it but it will be paid out. It’s just lumped together with the rest of the national debt.

Could this be avoided? Maybe. But only if the national debt, which is over $9 Trillion, is reduced to zero in our lifetimes. This would mean that government would have to cut back it’s size and spending. Most likely many programs that help people would fall victim to the cuts. I’m not saying it’s impossible for this to happen, just improbable. I hope I’m wrong.

Of course another way to look at it is it won’t be us but our kid’s generation that will pay it back. I’m not too sure that’s a positive spin on it though.

So there you have it! Do we have to pay the economic stimulus payments back?

No, but yes.

What do you think?

Update: There has been a lot of confusion over paying the Economic Stimulus Payment back.  Please read Paying Back the Economic Stimulus – Lots of Tax Confusion for more information and clarification!

photo by Refracted Moments

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Published or updated May 26, 2013.

Comments

  1. Whew! You scared me for a minute there. I’m glad that we don’t have to pay anything back immediately, but as you suggest, I’m sure we’ll be giving it back in taxes eventually.

  2. Greener Pastures says:

    great article! I am so irritated about the National Debt. When is THAT bubble going to collapse???

    Lisa

  3. That national debt is scary. $4 trillion more and it will be the size of our GDP. Good or bad, I don’t know — but I wouldn’t want to owe one year worth of my salary.

  4. Yes, we will be paying it back, in inflation. The Fed government doesn’t have any money, all they can do is print it, which creates inflation.

  5. @ Jeff – When I think of it, the stimulus check was more of a loan on our taxes of sorts. Like – here’s some taxes back, we’ll get it later from you.

    @ Greener Pastures – I hope something can be done with the debt. That’s not a bubble any of us want to see burst!

    @ Pinyo – Let’s see for an individual debt=income is real bad. Can’t be good for a country.

    @ Curt – From what I understand the US hasn’t really used printing money as a way to pay back it’s debt. That would really hurt us. Think the south in the civil war or Germany before world war II. People carrying wagons of cash to buy bread. That’s the road we go towards when we print more money to pay debt. Let’s hope the US doesn’t choose that direction.

  6. Eva Riffe says:

    No, but yes. Seems like a typical government answer. Put it in a firesafe lockbox and save it for your kids when they have no money.

  7. @ Eva – Lockbox is nice but it will lose value due to inflation. Better off with a CD perhaps!

  8. The government does not print money, the federal reserve does. The federal reserve is owned by private (most likely european) sources. It is no more “federal” than federal express. And they charge interest on every dollar they print (lend) the US government. Hence, you will pay be the debt but it won’t be in taxes it will be with your rights and freedoms. This economic bailout, for those of you who actually care, is a further attempt to consolidate wealth by the elite at the expense of everybody else. Good luck pretending like this is a good idea!

  9. Question… we were forced to wait until the very last day to file 2007 taxes due to circumstances beyond our control. Unfortunately, we faced an emergency before we were able to complete the TurboTax form and had to wait until after midnight to submit it. Will we be considered for a stimulus check if we plead our case via a letter to the IRS. If we don’t get a stimulus check, will we get any more back on our 08 taxes?

  10. @ MJL – I’m not a tax expert so you would have to contact the IRS perhaps. I would imagine that if you were eligible for a check you would still get it perhaps minus any late penalties.

  11. ansleymoon says:

    Yes, although it’s worded differently, you will have to pay back the stimulus check. It will be listed on your return as a “Recovery Rebate Credit”..You’ll enter the amount that you received from the stimulus on line 70 of the 1040 Form and it will be deducted from your REFUND. Check out the information on http://www.irs.gov under the 1040 instructions.

  12. ansleymoon says:

    From the http://www.irs.gov website:

    “Recovery Rebate Credit. Credit reduced or eliminated by economic stimulus payment. Your credit is reduced by any economic stimulus payment you received in 2008. However, if your credit is less than the stimulus payment you received, you do not have to repay the difference”.

    Basically saying, if you got a $600(single) or $1200(married) stimulus check then the credit will be reduced by that amount.

  13. Frugal Logic says:

    I’m with Lisa from Greener Pastures. How long can they keep borrowing money for? Surely it’s not sustainable? The bubble has to burst sometime.

    If I was personally heavy in debt and I kept borrowing more and more, I would eventually be declared bankrupt.

    Frugal Logic’s last blog post..Leaving Home Early to Save Money

    • @ Frugal Logic – Interesting how it doesn’t work for us but the government thinks it will work for them, isn’t it? I think the money could possible be used wisely but I’m a bit skeptical too.

  14. I feel this stimulus was a ridiculous idea; it feels like the bush administration was trying to deliver the message “Hey, I wrecked the economy… Here’s 20 bucks”… that didn’t solve anything, and people certainly didn’t “circulate” the money, as they had planned…I don’t like the idea of giving me something that you are expecting for me to give back… we will pay it back one way or another…

    • @ JW – It was a bad band-aid for the economy. It barley did anything except pad people’s bank accounts. We can’t consumer spend our way out of this economic downturn.

  15. I calculated my taxes on the H&R block website and it asks how much of a stimulus you received. When I put in $1200, the amount I owe is $1870. When I put in -0-, the amount I owe is $670. Are we being forced to pay the stimulus back on our 2008 taxes?

    • @ Angela – Interesting question. From what I understand we aren’t directly paying them back. Could it be you possible entered something incorrectly? I’ll have to look into this further. Thanks for bringing it up!

  16. christina says:

    Same thing happened to me. Basically the stimulus package was just a “loan” for our 2008 tax refund. I am only getting 200 back instead of the 800 because its deducting the amount they gave me for my stimulus, It sucks.

  17. A POINT OF ORDER IS NEEDED regarding the stimulus check we received last year. YOU ARE PAYING IT BACK THIS YEAR! My wife and I started our taxes last night using Turbo Tax. for the first time in the history of our 25 year marriage, we are going to have to pay taxes. I am okay with that, but my wife noticed that we had to verify that we ‘received’ a stimulus check last year. She verified it and noticed that the taxes owed changed. Ironically, it changed by THE AMOUNT OF OUR STIMULUS CHECK that we received! Don’t have to pay it back?! B.S.!!!!! How deceitful! I believe that it is time to wake up and smell the coffee AMERICA! Anything you get from the government is NOT always a good thing! Now, just wait until Americans start relaizing this little fact. We only THOUGHT that our economy has been been on a decline! Now, it will most likely be in an absolutely maximum velocity freefall! Is it time for Washington to burn down again? REVOLUTION! Semper Fi MAC!

  18. P.S., if you receive another stimulus check, burn it and send the ashes back to Washington, DC!

  19. I really don’t think it is fair to us as the foundation of this country to have to pay back such a small amount from a stimulus package, when corporate america is really at this point benfiting from the bailout money. Where do we stand?

  20. I feel like as if we the soul of this country is always being railroaded one way are another.If they were planning on taing the stimulus checks back they should of told us directly on how they were going to get it back

  21. Incredibly ridiculous. I was telling a friend that I did not remember having to pay it back when we got one after 2001. I guess this was an interest free loan!? I also am doing my return on Turbo Tax and the question was very confusing about the rebate check. It’s worded as if you will not have to pay it back and that it will not reduce your refund but then takes back the FULL amount. That’s like someone giving you a car and then next year giving you the bill.

    • @ Kev – Take a careful look at what line you are entering. You may be entering your Economic Stimulus amount in the Recovery Rebate line which is a different thing (although related). The IRS has said there have been many mistakes lately regarding the Economic Stimulus and the Recovery Rebate. You do NOT have to pay the Economic Stimulus back.

  22. your paying it back on your 2008 tax return, because if you didnt get you/d get it on your 08 return. that tells me you have to pay it back, please see a professional like myself!!!!!!!!!!!!

    • @ Mark – Not sure I understand your meaning. Many people are confusing the Recovery Rebate Credit with the Economic Stimulus which makes it look like you are paying back the stimulus but the fact is you don’t pay it back.

  23. FFB: then explain to me that if i did your tax return and you were getting back 3000 lets say without mentioning ANYTHING about stimulus, why then when i ask you the question how much you got, and you say 1800….why then would your refund amount go to 1200 dollars??????? could it be because you paid it back? of course how else would you explain it.

    Watch this….take a taxable dollar amount of 75000. forget stimulus at this point at all, look up the tax for 07 on 75g then look up the tax for 08 on 75g 07 tax is 11,598, 08 tax is 11,438 a difference of 160.00 that’s it.

    The fact is you ARE paying it back, 200 million tax payors got 600 dollars, thats 112 billion dollars, do you really think that a government in debt in the trillions, found a way to give everybody 112 billion? Makes no logical sense, do be fooled, you are paying it back!

    • @ Mark – Where on the tax form are you entering the economic stimulus info? You should only be entering it if you think you are eligible for the recovery credit. That’s where people are making the mistake. We do not pay it back. In fact if the government gave you too much based on your 07 return then you get to keep it.

  24. it’s a glass half empty glass half full scenerio. To me it can take on a look as though your paying it back, and on the other hand it can look as though it was free money.

    • @ Mark- It’s all in how you fill out the tax forms. But it is money that doesn’t have to be paid back.

  25. Majority Democrat Congress voted this stimulus in last year, thank you congress for putting us in debt, another 100 billion. We will pay this back (taxpayers) sometime.

  26. The bottom line. Our 2008 tax return was reduced by $1,800.00. The exact amount of the stimulus we received last year. I talked directly to the IRS about this. So yes, in most cases, the “stimulus” or what the IRS is now calling “rebate” was actually a no interest loan based on your 2007 tax return to be paid back this year. Thanks Uncle Sam for letting us know this upfront.

  27. Dan yours lo . wrong. Take your taxable income from both look up your tax if the taxable income is the same u will see that tax is only off by a few dollars between years. U must have paid in less tax in 08. The money is free for now and ur not paying it back at all on ur 08 return.

  28. Not answering from internet on my cellphone this time to avoid typo errors but………….***IMPORTANT***regarding this blog. I have figured out why so many think that they are paying this money back, here’s why, I am an Income Tax Professional and I made the same mistake for a few weeks. The people that are thinking that they are paying this back are using computer software i.e. turbo tax and the like, as I am honestly using from also a professional source. What happens is that when you first begin to enter in your data into the fill-in portion of the software, you are able to track where the refund or balance due stands as you are going along, what you are not realizing is that line 70 info (rebate line of form 1040)always starts out assuming that you did not receive the rebate, so it actually puts a number on that portion of the return as though you have paid in an amount, lets say 600 for single or 1200 for married filing joint. It does this because there is a worksheet that is produced for calculating the rebate number and that is determined at the end of all your data entry. And, as you are tracking your refund or amount due you see a certain number. Ok, at the point in which your are exiting the main screen your are asked if you did in fact receive the rebate check, you say yes and put in an amount of 600 lets say, AT THAT POINT you then notice that your refund goes down that amount, or that your balance due goes up that amount, when in fact your not thinking that in the beginning the system was placing that number on your return on line 70 as though you didnt receive it. So you are now gettin the impression you are paying it back when in fact YOU ARE NOT PAYING IT BACK!!!!! To finally prove this, take your taxable income number, in this example take taxable income of 75,000 lets say, look it up on a tax taxable for married filing a joint return, in my example on a 2007 tax table, then on a 2008 tax table, you will see that the 07 tax is 11597.50 and that the 08 tax is 11437.50 a difference of 160.00 that tax actually went down on 75g for 2008, that’s a tax break actually. And realize here that in my calculation for the 07 08 comparison I didnt even use nor take into consider any tax rebate. If you read what I have said in this comment you will be able to once and for all understand that you are not paying anything back AT ALL.

    • Been saying it all along, we aren’t paying it back. I wrote another post about the recovery rebate credit which is what is causing the confusion. I guess tax software hasn’t made the stimulus and recovery rebate/credits clear enough. Watch out and read everything carefully when doing your taxes!

  29. You have got to be kidding me!!! I do my taxes on Turbo taxes and have for years. This year I they added the Stimulus box saying that it would not affect your taxes in anyway. BS… I qualified for 1200.00 in May – since I owed the previous year, I received 797.00 dollars. In doing my taxes this year, by mistake after looking at the rebate stub, I put 797.00 instead of the 1200.00. My refund this year was to be 323.00 – got a letter from the IRS stating an error was found on line 70 of your 1040 form – HUH! I checked it out and found that it was the stimulus line – we know owe 80.00 – do the math people!!! 797.00+323.00+80.00=1200.00. My sons was the same, and he makes a lot less a year than us – without the stimulus he would have gotten back 600.00 more this year on his taxes. Free Money – I think not!!! How disgusting – our govenment must think we are a bunch of stupid peons!

  30. Clark, Clark come in Clark: Dont fall for believing simply that you are paying it back since you are NOT!!! Read my post on 3/6/09. You think your paying it back but your not. When you enter in your info on your Turbo Tax the system pre calculates your refund as though you did not receive the rebate check yet! So when you are paceing your refund a question comes up at the end and asks what your rebate amount was, you enter it and your refund goes down. That give you the impression that your paying it back, but your not. Clark do this, take your taxable income amount and look up what the fed tax is for 2007 and then for 2008, its only a couple dollars different not a few hundred. That will show you your not paying it back. And if you go to irs.gov get the rebate calculation form and you will see why you owed the additional 80 bucks, quite obvious after you do what i am telling you!!!!!!!!

  31. I honestly want to pay my money back….If everyone payed it back, that would cut a HUGE chunk off of our national debt. It is time to get our country back on track and start paying down our debts. At the time, I needed that money. Not to buy a tv, but to pay off my own personal debt. Now I am almost debt free, and I wish I could just send that money straight from where it came from. I was thankful for it in the moment I got it, but now it is just hurting our own country. We need to start digging out of our own hole. I wish we never got it in the first place.

    • I hear you. In some way, shape, or form it will be given back, just not directly.

      The point was for people to spend to keep the economy pumping. But it was basically an attempt the keep the house of cards from tumbling down any further.

      I think there are far better ways to put money in people’s pockets like tax reform.

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