Spitz: No strings tied to our cash?

The guys are skeptical.

Free money? Something smells wrong. Isn't this what we got in 2001, and then found out we owed a pile of dough to the IRS in 2002?

They've heard someone's father-in-law is an accountant and he said it's a bum deal. They've seen conflicting information on the Internet. They've seen so-called experts on TV who don't agree.

What's fact, what's fiction? Figure it out, they said.

Normally, I don't do this kind of story. Asking for my financial insight makes as much sense as asking my dog to perform triple-bypass surgery.

But the guys in the pressroom, well, I owe them my best shot. They had my back, back when I was in charge of getting out the paper on Friday nights.

Plus, they're hardly the only ones confused.

"There are a lot of myths out there," said Peggy Riley, the Internal Revenue Service's Boston-based spokeswoman. In fact, there are so many questions, the section on the economic stimulus rebate is at the very top of the irs.gov page, above information you might need to file this year's return.

"We want to correct the record and make sure people know the facts about the payments, and what to expect," Riley said.

Last month, in a moment as rare as an 85-degree day in February, Democrats and Republicans on Capitol Hill agreed with the president and approved a plan to give out money, starting in May.

For those with adjusted gross income under $75,000 ($150,000 for married couples filing jointly), the payments range from $300 per individual, for those living on Social Security or who earn too little to pay taxes, to $1,200 for couples filing jointly, plus $300 per dependent child.

You have to file a federal income tax form this year, based on your 2007 income, even if you normally don't file because your income is too low.

Payments are calculated on 2007 returns and the checks are sent automatically.

The IRS will send out two notices, the first saying it's sending out payments, the second informing you how much you're getting and when the check will arrive.

Taxpayers need to hold onto the second notice and be prepared to submit it when they file their federal taxes next spring, Riley said.

Sounds like a catch there. If I have to produce the notice of payment next year, it must mean the bonus check will be taxable income, right?

Wrong, said Riley.

"It's not going to be taxable, as some tax preparers have told people," she said. "You have to show it on your 2008 return, but it won't be taxable."

There's so much misinformation floating around, "people need to check (the IRS Web site) regularly" for updates, Riley said. But, bottom line, "it will not be taxable income for federal taxes."

Aha. What about state taxes?

"It's possible it could be taxed by individual states," Riley said.

So what will Massachusetts do?

"We are currently examining the issue and will issue guidance within the next couple of weeks," Bob Bliss, spokesman for the state Department of Revenue, said in an e-mail. "This is an issue for the 2008 tax year filing, which means it is an issue for the next tax year, which is why we haven't jumped on this in the same way we would if it were an issue for the 2007 tax year."

True, we still have to get through filing this year's taxes. But there's enough concern about what this will mean down the road to rack up seven pages of FAQs on irs.gov.

Some questions don't apply to most of us, like what to do if an adopted child hasn't got a Social Security number, and what residents of Guam should expect. Others address issues more likely on most minds, like will the payment reduce a 2008 refund or increase the amount we owe? (Again the answer is no.) If you owe unpaid taxes, the stimulus check may be used to pay past due taxes, as well as outstanding student loans or child support. But the payment cannot be automatically credited toward taxes on your 2008 income.

Still confused?

"We are reaching out to people," Riley said.

Normally, I don't get a warm and fuzzy feeling when I hear the IRS is reaching out to me. This time, I give the agency credit for understanding most folks have reservations about free money we have no way to refuse.

I've never used these words before and, trust me, it frightens me to use them now, but here goes: Trust the IRS. Its Web site is more likely to help you than a TV expert, someone's uncle's cousin or my ability to grasp the basics of Finances 101.

But even the most detailed, accurate IRS answers can't make me trust our national debt won't show how expensive free money can be.

(Julia Spitz can be reached at 508-626-3968 or jspitz@cnc.com. Check metrowestdailynews.com or milforddailynews.com for the Spitz Bitz blog.)