| February 01 2010
The American Recovery and Reinvestment Act (ARRA) for most folks is evident by the road signs near construction sites on federal highways, but that sells the Act short. The H.R. 1, American Recovery and Reinvestment Act of 2009, the Obama plan for some, is one of the key pillars of the economic stimulus plan - the President signed the bill into law on February 17, 2009, and implementation started almost immediately. The $787.2 billion economic stimulus plan is the largest fiscal injection into an ailing economy in history. It calls for $308 billion in discretionary spending, $288 billion in tax credits and incentives for individuals and $192 billion in direct aid to states, unemployed and for the adoption of health care information technology.
Through a combination of tax cuts, direct investments in a variety of sectors including infrastructure, energy, science and education and help to the unemployed and to the states, the economic stimulus plan looks to alleviate if not stop the decline in economic activity that started in late 2007. Since the recession started in December 2007, close to 7.5 million jobs have been shed across most sectors of the economy.
Critics of the Act say it has not created jobs, and unemployment has risen more than 2% since the date of enactment (Feb.17, 2009).
The ARRA includes a stimulus payment and tax credit mechanism targeted at low-income and middle class taxpayers. However, the 2009 version is very different “recovery rebate” program than the one we saw in 2008.
The Act (sec. 2201) allows a one-time Economic Recovery Payment of $250 to adults who were eligible for:
- Social Security benefits,
- Supplemental Security Income (SSI) benefits,
- Railroad Retirement benefits, or
- Veteran's compensation or pension benefits for any of the three months prior to the month of enactment (i.e., November 2008 – January 2009).
Unlike the 2008 rebate payments, eligibility for the Economic Recovery Payments is not affected by a taxpayer’s level of income. The payments will only be made to individuals whose address of record is in one of the 50 states, the District of Columbia, Puerto Rico, Guam, the United States Virgin Islands, American Samoa, or the Northern Mariana Islands.
Individuals will not receive a payment if their federal program benefits have been in prison or a fugitive, a probation or parole violator, have committed fraud, or [are] no longer lawfully present in the United States.
Retired Federal, State and Local government employees who are not covered by Social Security (called non-covered pensions) will not receive the Economic Recovery Payments. However, the Act creates a one-time credit for individuals who receive a government pension or annuity from work not covered by Social Security, and were not eligible to receive an Economic Recovery Payment. The amount of the credit is $250 ($500 for a joint return where both spouses are eligible) and it is allowed only against income taxes owed for tax year 2009. The credit is a refundable credit, meaning you WILL want to file a tax return just to get the credit. Unlike 2008, where everyone had to file a tax return just to get a rebate, only those who did not receive an Economic Recovery Payment who don’t regularly have to file a tax return, will need to file to this payment.
Now here’s the governments” words: “Each tax return on which this credit is claimed must include the social security number of the taxpayer (in the case of a joint return, the social security number of at least one spouse).
The credit or refund received by a government retiree shall not be taken into account as income and shall not be taken into account as resources for the month of receipt and the following two months for purposes of determining the eligibility for benefits or assistance under any Federal program or under any State or local program financed in whole or in part with Federal funds.”
This means that this rebate doesn’t count if you are on Medicaid in a nursing home, or other public assistance programs based on income/means tested programs that receive any part of its funding from a Federal program, such as Medicaid.. The payment or credit is NOT taxable.
Contact your local Social Security Administration office for more information, especially those of you with non-covered government pensions. This is the government agency responsible for both the Economic Recovery Payments AND the one time credit for those with non-covered pensions.
