Overall, the number of individual income-tax audits reached a 10-year high in 2007 – and the IRS plans to increase that number this year.

The push comes as the agency faces heavy pressure from Congress to raise additional revenue and shrink the nation's $290 billion "tax gap," the difference between what's collected and what should be collected.

IRS research indicates that much of the tax noncompliance is committed by self-employed workers, such as consultants and small-business owners, whose taxes aren't withheld from their pay and whose income isn't reported separately.

This year, "we will continue to focus on audits of high-income individuals," said Linda Stiff, the IRS's acting commissioner.

In addition, agents have increased audits of taxpayers involved in partnerships and businesses organized as "S corporations."

For the vast majority of taxpayers, the odds of getting audited remain low. Only about 1 percent of all individual returns filed in recent years have been audited. But the chances now are higher than just a few years ago.

The IRS relies on numerous techniques to choose which returns to audit. Many are selected using a secret computerized-scoring system that the IRS recently updated, which is based on a continuing research project involving in-depth audits of thousands of returns. Computer programs assign each tax return a score that evaluates the potential for inaccuracies, based on the IRS's experience with similar returns.

Others are picked because of "mismatches" – which means that something a taxpayer reported doesn't match what was reported separately to the IRS by employers or financial institutions.

Some returns get audited because they were done by a tax preparer the IRS suspects of wrongdoing.

Then there are those that get selected because of a tip from confidential informants, such as a former business partner or ex-spouse.

The overall impact of the payout – placing some $100 billion mostly in the hands of middle- and lower-income taxpayers – should modestly boost the nation's economy in the second half of the year, economists agree. But it may only soften the blow of any recession, making it "shallower" than it might be without this spending.

The president sought this quick relief as "a shot in the arm" for an economy which the White House maintains is going through a "rough patch." The White House, while acknowledging that the growth of the economy is slowing, does not concede that a recession is coming – though the Bush administration is projecting near-record federal budget deficits this year and next, with the tax rebates adding to that deficit.

"Money will be going directly to American workers, family and individuals," Bush said earlier this week. "It's going to help deal with the uncertainties in this economy."

Congress quickly responded to the president's call for an initial package of $145-billion in tax relief for individuals and families as well as tax relief for businesses. With swift bipartisan approval, Congress gave the president a $168-billion measure that includes tax breaks aimed at encouraging business expansion and increases in the mortgage limits that federal lending agencies can support in the midst of a home-mortgage crisis.

"Many Americans are worried about their mortgages," Bush said today. "My administration is working to solve this problem."

The lion's share of the relief will come as tax rebates for eligible taxpayers, people earning at least $3,000 a year. The minimum payment will be $300 for an individual and $600 for a couple filing a joint tax return. Based on the amount of taxes that people pay, the rebate will be as much as $600 for an individual and $1,200 for a couple. In addition, rebates will add $300 for each child in a family eligible for tax credits.

The sliding scale is designed to offer the most money in checks to lower- and middle-income taxpayers, with the nonpartisan Center on Budget and Policy Priorities reporting that a couple with two children with an income of $35,000 a year will see a tax rebate of $1,800 – the maximum for a couple with money added for the children.

And because that money will be going to people most likely to spend it, rather than save or invest it, economists agree that it should have its intended effect of pumping billions of dollars into an ailing economy.

"This puts money in the hands of people who will spend it," said Chad Stone, chief economist for the Center. "The more people are up against their credit card limits, the more likely they are to spend the rebates."

Combined with cuts which the Federal Reserve has made in interest rates this year, Stone says, the tax rebates should offer some modest help for the economy at a time when many are predicting a recession.

"On balance, it will provide some useful stimulus, on top of the stimulus that will come from the big rate cuts that the Fed had made," he said. "A lot of people will say it's too little to make a difference. Maybe, if that were the only thing going on that might be true. But it's not the only thing going on."

The Economic Stimulus Act of 2008, which Bush signed this afternoon in an East Room ceremony at the White House, could boost the nation's Gross Domestic Product by one-half to one-percent in the second half of the year, other economists say.

"Clearly it will have impact on the second half of this year," said Sung Won Sohn, an economist who teaches at California State University and served as chief economist for Wells Fargo Bank. "We think it could boost GDP at an annual rate of 1 percent during the second half of 2008. That is fairly significant.

"The rebate is structured in such a way that it aims at essentially low and moderate income folks," Sohn said. "They are suffering because of the high price of gasoline and the high price of food.

Several other money-strapped states have mulled going after the taxes.

Spitzer's proposed budget would require Internet giants like Amazon to collect tax on an estimated $47 million in sales to New Yorkers, who are currently required by an honor system to report how much they spend online on their tax returns.

Amazon spokesman Paul Misener says the governor's plan would be a radical departure from anything currently being done in the U.S.

He says other states — including California, Michigan, North Carolina and Texas — have considered similar plans, but abandoned the idea.

To help people who earn little or nothing - and might be more likely to spend their rebates - Congress said that anyone who had at least $3,000 in income from a job, self-employment, Social Security and/or certain veterans benefits would get a flat rebate of $300 if single or $600 if married filing jointly, even if they don't owe income tax.

If your 2007 federal tax liability is between $300 and $600 (single) or $600 and $1,200 (married), your rebate will be equal to whatever you paid in tax.

Anyone who gets a rebate of any size will get an additional $300 for each child eligible for the child tax credit in 2008. To qualify, the child must be younger than 17 on Dec. 31, 2008.

Higher-income people won't get anything.

The rebates - including the $300 rebate for kids - start to shrink when your adjusted gross income hits $75,000 (single) or $150,000 (married). Adjusted gross income includes income from all sources, but before most deductions and exemptions have been subtracted.

The rebate is reduced by $50 for every $1,000 you earn above the income limit. It disappears at some point which varies depending on your family size.

Singles with more than $87,000 in gross income and couples with more than $174,000 get no rebate if they have no children.

Those with children can earn a bit more before losing their rebate because it's bigger to start out with. A married couple with two kids, for example, get no rebate when their income exceeds $186,000, says Mark Luscombe, principal tax analyst with CCH.

Rebates will not be sent to nonresident aliens (you must have a Social Security number to get a rebate), estates, trusts or people who are or could be claimed as a dependent on someone else's tax return. That means most high school and many college students won't get a rebate even if they earn more than $3,000 or pay taxes.

The Internal Revenue Service will start issuing rebates - via check or possibly direct deposit - in early May.

The rebates represent a 2008 tax cut. But instead of getting the tax cut next year, when you file your 2008 return, you'll get it this year.

The IRS, however, will use your 2007 tax return to determine who gets a rebate and how much.

If it turns out that you would have gotten a bigger tax rebate based on your 2008 tax return, the IRS will refund you the difference. For example, a middle-income family that has a baby born in 2008 should be able to reap an extra $300 when they file their tax return next year, Luscombe says.

On the other hand, if you would have gotten a smaller rebate based on your 2008 return, you won't have to pay back the difference, says Bob Scharin, RIA Senior Tax Analyst from Thomson Tax & Accounting.

Most rebates will be out by the summer, but if you don't file your 2007 taxes until the extended Oct. 15 deadline, you won't get yours until year end, CCH reports.

Unlike the 2001 rebates, which went only to people who paid tax, the 2008 rebates will go to many people who don't file tax returns.

The IRS says it will work with the Social Security Administration and Department of Veterans Affairs to make sure all eligible individuals know how to get a rebate.

Tax advisers are encouraging people who had more than $3,000 in income from a job or self-employment in 2007 to file a tax return even if they don't owe tax so the IRS knows how to find them.

The IRS has been warning taxpayers not to fall for telephone or e-mail scams that use the rebate as bait. The perpetrators try to trick people into revealing personal information they use to steal their identities. The IRS never sends unsolicited e-mails.

Also be wary of banks and loan companies that offer refund anticipation loans that include the anticipated rebates when a 2007 return is filed. While apparently legal, these loans can be extremely costly.

Those two assumptions could affect some $1 trillion in revenues over the next five years.

The budget outline presented Monday envisions the loss of $635 billion in revenues over the next five years if Congress makes permanent those tax cuts involving capital gains, the repeal of the estate tax, breaks for married couples and those with children and individual income tax rates. Over 10 years the tax cuts — many set to expire in 2010 if Congress does not act — will cost $2 trillion.

The Congressional Budget Office estimates another $444 billion in interest payments to service that debt over 10 years.

The Democrats who now control Congress show no inclination to extend the tax cuts, arguing that they disproportionately help the rich and the money can be better spent to improve health care or reduce the federal deficit.

The president's proposals to cut out wasteful spending "are dwarfed by the more than $700 billion that would be added to the deficit over the next five years from extending his tax cuts that largely benefit the wealthiest Americans," said House Majority Leader Steny Hoyer, D-Md.

Republicans say that failure to extend the tax cuts would result in 116 million taxpayers seeing an average tax increase of $1,800. "We recognize that in order for this economy to grow, it's important to make the tax relief permanent," Bush said.

The budget proposal also records some $70 billion in lost revenue this year and next under the assumption that Congress will take steps to block the alternative minimum tax from hitting more middle-class taxpayers.

The AMT was enacted 40 years ago to ensure that a small number of very wealthy people can't avoid paying taxes. But the tax was never adjusted for inflation, and Congress has been forced to take stopgap measures every year to shield middle-income-level people from the tax. Legislation passed by Congress in late December kept those affected by the AMT from growing from 4 million in 2006 to 25 million in the 2007 tax year.

House Ways and Means Committee Chairman Charles Rangel, D-N.Y., has estimated that it will cost $800 billion to repeal the AMT. Without that politically difficult action, Congress will have to continue to enact yearly fixes, at a cost of $313 billion over the next five years, the Congressional Budget Office says.

The budget proposal also sees revenue losses of nearly $100 billion over five years from health insurance tax incentives promoted by the White House but opposed by Democrats seeing them as threats to employer-based insurance plans.

The tax break has allowed developers and builders to save money on property taxes because it froze the taxable market value of the land at the time the land is bought. The tax on the land would remain the same until the land is developed and sold.

Since land values generally rise over time and especially if adjoining or nearby lots are sold for houses or businesses the developers and homebuilders will have to pay more property taxes.

The state Supreme Court says county assessors must redetermine the market value of land set for development every year - just like they do for land owned by other property owners.