FEDERAL CHECKS REALLY ADVANCES ON REFUNDS

They have been called tax refunds and rebates, but they are neither.

The checks millions of Americans have been getting from the federal government since late July actually are advance payments against 2001 refunds. They are being sent out now to retroactively apply a lower tax bracket this year and jump-start the sluggish economy.

"We've heard it called all sorts of things, but this money is an advance," said David Stell of the Internal Revenue Service in Oklahoma City. "Rather than wait for the new lower rate, the law was written so that the difference in rates would be paid to you now."

The checks of up to $300 for individuals, $500 for heads of households and $600 for married couples filing jointly represent part of the 10-year, $1.35 trillion tax cut passed by Congress and signed by President George W. Bush. Under the tax bill, a portion of income that was taxed at 15 percent will be taxed at 10 percent.

This is true no matter how much a taxpayer's income is or how the tax return is filed, said Debbie Beussink, a local certified public accountant. "It doesn't matter if you're a millionaire, you're getting a check," she said.

The 10 percent applies to the first $6,000 of taxable income for singles, $10,000 for single parents and $12,000 for married couples. The checks represent the 5 percent difference.

Local certified public accountant Paula Huggins said people should think of the money as a credit.

"It's really an advance on the refund the government thinks you're going to get under the new bracket," Huggins said. "If the president had waited for this to start until 2002, then people would have just gotten bigger refunds next year."

But the government wants people to have the money now, she said.

"They wanted to spur the economy, and it's partly political, I'm sure," she said. "They want to say that the new administration got some money in your pocket."

The advance payment doesn't mean higher taxes or lower refunds next year, Stell said.

"This is independent of what you might be entitled to in 2002 when you file your 2001 tax returns," Stell said. "Basically, this amount will not show up on 2001 tax returns at all. This is all based on a change in tax rates. Instead of getting the money next year, people are getting it now, and people are never going to have to pay that back."

Stell said any confusion is a result of taxpayer speculation about the checks and a complex piece of legislation that provides for the payments.