Tax rebate deposits under way
The government began depositing tax rebate checks in thousands of bank accounts Monday as the stimulus program aimed at giving the ailing economy a jump-start got under way early.
The Internal Revenue Service started making the direct deposits Monday with the goal of completing 800,000 payments each day over the first three days of this week.
No deposits will be made Thursday while the IRS prepares a big batch of 5 million direct deposits scheduled on Friday.
The IRS had expected to begin the program in May but was able to start a few days earlier by using a computer system that can process payments on a daily basis. The government's paper checks will start going out May 9, a week earlier than previously announced.
The tax rebates starting to show up in Americans' bank accounts will likely be used for food and other basic necessities, making them less of an economic stimulus than the Bush administration hoped for, analysts say.
Lower-income shoppers, squeezed by higher gasoline and food prices, are expected to use the money to play catch-up on basic purchases like beef and paper products.
Another big chunk is expected to be used to pay down debt.
"Consumers are so feeling the pinch that ... they are really being forced to step away from luxury or discretionary purchases," said Janet Hoffman, managing partner of the North American retail division of Accenture.
In addition to grocery chains, other major beneficiaries should be discounters like Wal-Mart and clothing outlets like T.J. Maxx, she said.
With consumer spending screeching to a halt in recent months, the retail industry needs shoppers to splurge, and many chains have launched specific programs to grab a share of the billions of dollars flowing to consumer households.
Both Kroger Co. and department store operator Sears Holdings Corp. are offering discounts and freebies to shoppers who convert rebate checks into gift cards.
Grocery store chain Supervalu Inc. said last week that customers can redeem checks for store gift cards in $300 increments, and stores will add an extra $30 to the card.
This applies at Hornbacher's grocery stores in Fargo-Moorhead, said president Dean Hornbacher.
"Grocery prices are going up pretty fast," he said. "(We) see it as an opportunity to maybe give people the opportunity to stretch their food dollars a little further."
Many economists believe the country has fallen into a recession, but President Bush last week disputed that view, saying he believed it was a period of slower growth that would be helped by the stimulus checks.
Democrats, however, pointing to rising layoffs as the economy weakens, contend that more needs to be done.
They are pushing for a second stimulus package that would include extending unemployment benefits for another 13 weeks, boosting food stamp benefits and adding billions of dollars for construction projects such as roads and bridges.
Presidential press secretary Dana Perino told reporters Monday that the administration was projecting that the first stimulus measure will create around 500,000 jobs this year and should be given time to work before a second package is considered.
- Rebates range up to $600 for individuals making less than $75,000 and up to $1,200 for married couples making less than $150,000. There are also $300 rebates for eligible children younger than 17.
The stimulus allows for a phase-out rate for households above the income caps.
- People who do not have to file a tax return but have at least $3,000 in qualifying income may be eligible for an economic stimulus payment of $300 for an individual and $600 for a couple plus $300 per qualifying child.
- People who have not yet filed returns have until Oct. 15 to do so in order to receive a stimulus payment. Form 1040A can be obtained at www.IRS.gov.
- The rebates are expected to reach 130 million households.
- The rebates are the centerpiece of the government's $168 billion economic stimulus package enacted in February and are designed to bolster consumer spending and lift the economy out of the doldrums.
- The first wave of payments is going to people who opted for direct deposit on their 2007 income tax returns.
- Both the direct deposit payments and the paper checks are being processed by the last two digits of a taxpayers' Social Security number. All rebates are expected to be sent out by July 11.
- The IRS estimates two-thirds of the payments will be paper checks and one-third will be direct deposits.
- The payment schedule covers people who filed early enough to have their tax returns processed by April 15.
People who did not submit a return in time for it to be processed by April 15 may see their stimulus payments later than the scheduled dates.
The IRS continues to urge people who did not file returns to file in order to receive an economic stimulus check.
Source: IRS.gov, Associated Press, Money.CNN.com