A few days before you actually receive your check you will receive a letter from the IRS telling you that the check is in the mail and identifying the amount of your rebate.
Talk about government waste. As NY Senator Charles Schumer has said, “There are countless better uses for $42 million than a self-congratulatory mailer that gives the president a pat on the back for an idea that wasn't even his."
One client had just received a notice telling her that she owed a penalty for underpayment of estimated tax for her 2007 Form 1040, which we had been expecting. A few days later she got the letter from the IRS discussed above that told what the amount of her the “stimulus” rebate check would be and that it was on its way.
She was just about to write a check to “Sam” for the underpayment penalty when her check arrived – for the amount of her rebate minus the 2007 underpayment penalty!
The advance notice did not mention the reduction for the 2007 penalty. But she did receive another letter from “Sam” a few days after the check had arrived explaining what had been deducted from the rebate.
I anticipated that if you owed money on a 2006 or earlier 1040 the outstanding balance would be subtracted from the rebate check. However I was surprised that the rebate system is so sophisticated so as to be able to withhold taxes, penalties and interest due on the current return.