About $42 billion in tax rebate checks should start hitting the mail this week. The checks are intended to stimulate the economy. Whether they do that or not remains to be seen; many families say the checks will go towards paying for such basic necessities as groceries and gas, both setting new price records almost daily.
The tax rebates ranging from $300 to $600, or up to $1,200 for married couples who file jointly will be available to some direct-deposit taxpayers as early as today, though checks by mail will take longer. Many parents will receive an additional $300 per child.
A survey conducted for the National Retail Federation finds that the biggest leap in rebate spending will come at the gas pump, as 17.2 million people plan to use at least some of their tax rebate check to pay for gas, up from 12.1 million people who planned to do so in February.
The rising cost of everyday items like milk, bread and rice -- and even chicken -- means that consumers will wind up spending a bigger chunk of the checks on groceries, with 21.2 million people saying they will use a portion of the check for food, up from 20.4 million people in February.
Exxon Mobil reported record profits of $8.8 billion for the first quarter of the year but so far there's no sign of any plans by the oil industry to offer special incentive programs to encourage consumers to buy more gas, but grocers have jumped on the bandwagon in a big way.
Gift card promotions
Kroger is offering a gift card promotion. A customer with a $300 refund check will get a gift card for $330, two $330 gift cards for $600; and four $330 gift cards for $1,200.
Customers can exchange their checks for gift cards in the customer service center of any of the chain's stores between May 2 and July 31, Kroger said. A Kroger "customer loyalty card" is also required. The program is limited to one per household, with a limit of $1,200.
David Dillon, Kroger chairman and CEO -- who was paid $1.7 million last year -- said, "Grocery bills represent a significant expenditure for the average American family."
Other retailers are close behind:
• Supervalu, parent company of Albertsons, Jewel-Osco, Shop 'n Save and other grocery chains, has a Kroger-like program. It says shoppers will be able to exchange tax-rebate checks for store gift cards, with an extra $30 added for every $300 in rebate checks. The offer will be valid through July 31.
• Sears will also give customers an additional return if they spend their entire rebate on a gift card, for use at Sears, Kmart or Lands' End stores. From May 14 to July 19, customers can cash in the rebates for a gift card in the amount of the check plus 10%. The gift cards carry no expiration dates or fees.
• Wal-Mart, the largest U.S. retailer, says it's working on a tax-rebate promotion and will announce it shortly. -related program within a few days. Here's what other retailers plan:
• Staples is using promotions to urge small-business owners to spend their rebates. Until May 4, it's offering $50 off purchases of $500 or more and $150 off furniture costing at least $1,000. Through June 30, for purchases of more than $499 with a Staples credit card, the store will charge no interest and require no payments for six months, Staples said.
• To help consumers save energy (and boost its light-bulb sales), Home Depot is offering discounts through July on compact fluorescent light bulbs and Energy Star appliances. That helps "take a short-term stimulus and turn it into a long-term investment," spokeswoman Jean Niemi said.
Cars, furniture
Not surprisingly, consumers' plans for the rebates have changed as the cost of essentials has risen. Who can buy a big-screen TV when a tank of gas costs $60?
The National Retail Federation survey found that fewer people plan to spend rebate checks to buy furniture (2.7 million vs. 4.0 million in February), purchase a vehicle (2.4 million vs. 3.2 million in February), or use it for me time at a salon or spa (2.9 million vs. 3.5 million in February).
The rising cost of groceries and gasoline means that discretionary spending is taking a backseat to necessities, said NRF President and CEO Tracy Mullin. For many consumers, struggling with rising bills and lowering home values, economic stimulus checks could not come at a better time.
According to the survery, consumers as a whole plan to spend 39.9 percent of their tax rebate checks, providing a $42.2 billion boost to the economy.
Consumers will also use the money to pay down debt ($28.1 billion), save ($20.1 billion), invest ($3.4 billion) and pay medical bills ($4.9 billion). (Consumers said they would also use $6.9 billion in other ways.)
Tracking payments
Invariably, some payments will go astray. To help taxpayers worried about their check, the Internal Revenue Service has set up an online interface to tell you where you are in line.
Those who opted to receive the payments through direct deposit will receive their checks first. The payments will continue on a weekly basis, with the last two digits of your Social Security number determining when you receive your payment.
To receive a payment, taxpayers must have a valid Social Security number, $3,000 of income and must have filed a 2007 federal tax return. IRS will take care of the rest.
By the way, the IRS reminds us that the rebates are not taxable. The money you receive will not reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return.
Not too late
If you haven't yet filed your return, don't despair. Even though April 15 has passed, it's not too late to file a tax return in order to collect your stimulus rebate check.
Taxpayers who qualify for a stimulus check will receive one by the end of 2008, as long as they file by October 15, 2008 - but no rebate checks will be issued after 2008.
Seniors eligible
The rebates are not restricted to those who are currently in the workforce. Up to 20 million Americans who rely primarily on Social Security income qualify for a check from the federal government. Even seniors who do not earn income through current employment can qualify for a stimulus check, if their Social Security benefits, Veterans Affairs (VA) benefits, and railroad retirement benefits totaled at least $3,000 in 2007.
In most cases, retirees will receive an economic stimulus check ranging from $300 to $600.
Seniors need to file a 2007 federal tax return on IRS Form 1040 or 1040A (short form) to receive the check. Seniors must file a 2007 tax return even if their income is normally low enough that they were not required to file in previous years.
