Bill White Net Works

The next time lawmakers decide to stimulate the economy, maybe they should arrange for a fleet of helicopters to drop $100 bills over populated areas. That might not be a very efficient way of getting money in taxpayers' pockets. But given the events of the past couple of weeks, this much is clear: It's not easy for the government to give away money.

So far, the IRS has issued more than 45 million tax rebate payments, totaling nearly $41 billion. The payments, ranging from $300 to $600 a person, or $1,200 for a married couple, were distributed mainly by direct deposit to taxpayers who arranged to have their refunds delivered that way. The goal of the direct-deposit program was to get money into taxpayers' wallets as fast as possible.

But hundreds of thousands of taxpayers who had their e-filing or tax-preparation fees deducted from their refunds are belatedly discovering that they'll receive their checks by mail — even if they received direct deposit of their refunds.

The reason: If you arranged to have fees deducted from your refund, the tax-preparation company used a third-party bank to process the transaction. If, for example, you used TurboTax, the transaction was handled by Santa Barbara Bank & Trust. The IRS transmitted your refund to a temporary account at the bank, which retained its own fees, sent the tax-preparation fees to the tax preparer and deposited the balance of your refund in your account, says Julie Miller, spokeswoman for TurboTax.

As a result, Miller says, the IRS has no actual bank account information for taxpayers who had their fees deducted from their refunds. Those taxpayers — along with taxpayers who applied for a refund-anticipation loan — will receive their checks by mail. The IRS began mailing paper checks on May 16 and will continue mailing them through July 11 (see box).

Miller says TurboTax posted a notice on its website on March 23, stating that taxpayers who had fees deducted from their refunds would receive their rebates by mail. That's when the IRS announced how it would handle those transactions, she says. By that time, though, many taxpayers had already filed their tax returns.

In fact, many taxpayers who were expecting a refund had filed their returns before Feb. 13, when the economic stimulus package was signed into law, says Amy McAnarney of H&R Block. Those taxpayers — and their tax preparers — had no way of knowing that deducting their fees would delay their tax rebates.

Wade Poulsen, 39, a procurement engineer in Spokane, Wash., says he thought he would receive his rebate by May 2. When it failed to arrive, he spent two days trying to get through to the IRS. When he finally reached a live person, he learned that his rebate would arrive by mail because he'd had his TurboTax fees deducted from his refund.

Meanwhile, many taxpayers who owed taxes this year are also discovering that their rebates will arrive by mail, even if they provided bank account information on their returns.

If you used direct debit to pay your tax bill, the IRS won't deposit your rebate in that account. You'll get your rebate check by mail.

Other taxpayers are receiving a smaller-than-expected slice of the stimulus pie. Still others are discovering that they won't get a rebate at all. Some reasons:

•One spouse doesn't have a Social Security number. If you filed your 2007 tax return jointly with someone who doesn't have a Social Security number, you won't receive a rebate, says Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.

That provision was included in the economic stimulus package to prevent illegal immigrants from receiving the rebates. But it also affects taxpayers whose spouses are here legally but haven't yet received a Social Security number. Many of these individuals pay taxes using an Individual Taxpayer Identification Number issued by the IRS. But if you or your spouse used an ITIN on your tax return, and you filed jointly, you won't get a rebate.

•You or your spouse owes back taxes or child support, or have defaulted on your federal student loans. In that case, some or all of your rebate could be withheld. Federal student loans are usually considered in default if you've failed to make payments for nine months, according to the CPA institute.

Some readers who are married to people with these types of debts have asked whether they'll still receive their share of the rebate. Unfortunately, if you filed jointly, the answer is no, Ochsenschlager says. When a married couple files a joint return, he says, their entire rebate may be withheld to pay one spouse's obligations.

Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. E-mail her at: sblock@usatoday.com.

IRS gives people until Oct. 15 to file for rebates

Tax season's over, but the Internal Revenue Service says it will accept late returns until Oct. 15 from anyone who qualifies for an economic stimulus rebate check and doesn't owe the federal government money.

"Don't worry if you did not file a return by April 15," IRS Commissioner Doug Shulman said in a statement. "If you meet the criteria, you are still eligible for a stimulus payment."

The IRS is trying to reach millions of people, including many retirees who don't have taxable income, who normally aren't required to file tax returns because their incomes are too low or not taxable. Those people won't get rebate checks unless they file returns.

IRS Announces Tax Rebate Schedule, Calculator

The IRS has announced that it will start sending the economic stimulus tax rebate checks starting on May 2, with the first round of weekly payments to be completed by early July. In addition, the IRS has launched an Online Tax Rebate Calculator to help people determine the amount of their rebate check.

Rebate check direct deposit or mailings will be made according to the last two digits of your Social Security numbers as follows:

Filing by April 15 and using direct deposit are key to speedy rebates

The IRS plans to send more than 130 million rebates, or economic stimulus payments, between May 2 and July 11. When will you get yours? That depends on three things:

When you file your tax return, whether before or after April 15

How you receive your payment, whether by direct deposit or by check

The last two digits of your Social Security number

See the schedule below, followed by frequently asked questions about receiving a rebate.

Payment schedule if you file by April 15

... and get your rebate by DIRECT DEPOSIT

Last two digits of your Social Security number:

Payments will be transmitted:

00 through 20 May 2

21 through 75 May 8

76 through 99 May 16

.. or get your rebate by MAIL

Last two digits of your Social Security number:

Payments will be mailed by:

00 through 09 May 16

10 through 18 May 23

19 through 25 May 30

26 through 38 June 6

39 through 51 June 13

52 through 63 June 20

64 through 75 June 27

76 through 87 July 4

88 through 99 July 11

Learn if you qualify

The only way to get a stimulus payment is to file a 2007 tax return, even if you don’t normally do so. For more information, view 2007 Rebates for Social Security, Railroad Retirement and Veterans' Beneficiaries. To learn more about the stimulus payments, read Tax Rebate Plan.

IRS Free File Now Available for Nonfilers Who Must File a Return to Receive Economic Stimulus Payment

WASHINGTON — The Internal Revenue Service announced today that individuals who normally do not file a tax return but must do so this year in order to receive their 2008 economic stimulus payment can now use the IRS Free File program to help them file returns for 2007.

IRS and several of its partners in the Free File Alliance can now accept returns submitted by people who have no legal requirement to file other than to receive their payments. People in this category should take care to use only those companies listed on the Free File - Economic Stimulus Payment.

“If you are only filing a return to receive your economic stimulus payment, Free File is a great option for you. All you need to do is follow the simple instructions provided by the software. It’s easy, and it’s free,” said Acting IRS Commissioner Linda E. Stiff.

Individuals and families must have at least $3,000 of income from any combination of earned income, Social Security retirement or disability benefits, certain Railroad retirement benefits, or disability compensation, disability pension, or survivor benefits paid by the Veterans Affairs. The minimum economic stimulus payment is $300 for individuals and $600 for married couples.

To obtain a payment, all people who are eligible for payments of up to $600 for individuals ($1,200 for married couples) must file a tax return in order for the IRS to know their name, address and eligibility. Parents also may qualify for a $300 payment for each eligible child younger than 17. Valid Social Security numbers are required.

Taxpayers who normally file a tax return and want to use Free File, should simply go to the main Free File page and click ‘Start Now’ to see a list of the 19 companies offering free preparation and electronic filing to the IRS. Free File is available to 97 million taxpayers who earn $54,000 or less.

There is no charge for using IRS Free File. With just a few answers, people can complete a simple form and use IRS e-file. The IRS also urges all filers to use direct deposit, if they have a checking or savings account, because it is the fastest way to receive an economic stimulus payment.

Once people file a tax return, they don’t need to do anything more. The IRS will do the rest. The IRS will begin issuing payments starting in May.

UPDATE:

Special Economic Stimulus Letters Reach Mailboxes in March

WASHINGTON — More than 130 million American households will begin receiving Internal Revenue Service letters next week reminding them to file a 2007 tax return in order to receive a 2008 economic stimulus payment.

The mailings by the IRS will begin the first week in March and continue throughout the month. The informational notice, titled Economic Stimulus Payment Notice, alerts people that they may be eligible for a one-time stimulus payment of up to $600 ($1,200 married filing jointly) starting in May. There also is a $300 per child payment for qualifying children younger than 17.

“This special letters remind people that they won’t need to do anything more than file a 2007 tax return in order to put the stimulus payment process in motion,” Acting IRS Commissioner Linda Stiff said.

The notice is informational and does not seek any financial information. The main mailings, which will take place in three weekly batches, will go to taxpayers who filed a tax return last year.

“To receive a payment in 2008, individuals who qualify will not have to do anything more than file a 2007 tax return. The IRS will determine eligibility, figure the amount and send the payment,” the notice states. “This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds for 2007 will be made separately from this one-time payment.”

However, some people must take an extra step this year to receive a stimulus payment. In late March, the IRS will send a special mailing to certain recipients of Social Security and Veterans Affairs benefits. Generally, those benefits are nontaxable and recipients do not file tax returns. In order to receive a stimulus payment, people in this group need to file a tax return if they have at least $3,000 from a combination of certain Social Security benefits, Veterans benefits and earned income. The minimum stimulus payment for these people is $300 ($600 for married filing jointly).

The IRS has created a sample of Form 1040A with information on how to fill out a few lines that will enable eligible people who do not normally file a tax return to receive the stimulus payment.

More details on the special mailings for recipients of Social Security and veterans benefits will be available soon.

IRS Will Send Stimulus Payments Automatically Starting in May; Eligible Taxpayers Must File a 2007 Tax Return to Receive Rebate

WASHINGTON — The Internal Revenue Service today advised taxpayers that in most cases they will not have to do anything extra this year to get the economic stimulus payments beginning in May.

“If you are eligible for a payment, all you have to do is file a 2007 tax return and the IRS will do the rest,” said Acting IRS Commissioner Linda Stiff.

The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payments.

The IRS will begin sending taxpayers their payments in early May after the current tax season concludes. Payments to more than 130 million taxpayers will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future.

Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.

Most taxpayers just need to file a 2007 tax return as usual. No other action, extra form or call is necessary. This Web site will be the best information source for all updates and taxpayer questions.

In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return).

The law also allows for payments for select taxpayers who have no tax liability, such as low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income.

Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. While these people may not be normally required to file a tax return because they do not meet the filing requirement, the IRS emphasizes they must file a 2007 return in order to receive a payment.

Recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X. The IRS is working with the Social Security Administration and Department of Veterans Affairs to ensure that recipients are aware of this issue.

“Some people receiving Social Security and veterans’ benefits may not realize they will need to file a tax return to get the stimulus payment,” Stiff said. “To reach these people, the IRS and Treasury will work closely with the Department of Veterans Affairs, the Social Security Administration and key beneficiary groups on outreach efforts.”

Eligible taxpayers who qualify for a payment will receive an additional $300 for each child who qualifies for the child tax credit.

Payments to higher income taxpayers will be reduced by 5 percent of the amount of adjusted gross income above $75,000 for individuals and $150,000 for those filing jointly.

Taxpayers must have valid Social Security Numbers to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. And, children must have valid Social Security Numbers to be eligible as qualifying children.

Taxpayers who file their tax returns using an Individual Taxpayer Identification Number issued by the IRS or any number issued by the IRS are ineligible. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS.

To accommodate taxpayers who file tax returns later in the year, the IRS will continue sending payments until December 31, 2008. The IRS also cautions taxpayers that if they file their 2007 tax return and then move their residence that they should file a change of address card with the U.S. Postal Service.

IRS Successfully Processing Tax Forms Affected by AMT Legislation

WASHINGTON — The Internal Revenue Service is now processing five tax forms affected by legislation involving the Alternative Minimum Tax (AMT).

On Monday, IRS systems began to accept and process returns that include the five affected forms. After several days of processing, the IRS has confirmed all systems are working properly.

In late December, the IRS announced it would delay processing of several tax forms. For the vast majority of taxpayers, the filing season this year began on time. But for any taxpayer whose return included any of the five affected forms, filing opened on Feb. 11.

The affected forms are:
Form 8863, Education Credits
Form 5695, Residential Energy Credits
Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers;
Form 8396, Mortgage Interest Credit
Form 8859, District of Columbia First-Time Homebuyer Credit

Approximately 13.5 million taxpayers will use these forms this year. Altogether, the IRS expects to receive nearly 140 million individual tax return submissions this year.

The IRS has worked closely with the software industry and tax practitioners during the reprogramming process to minimize disruptions for taxpayers and the tax community.

For more information, see Alternative Minimum Tax –– How It Affects Filing Season 2008.

Reasons for delayed and no-show tax rebate checks pile up