Tuesday, June 9, 2009


Say what you will about the Internal Revenue Service. If they have money for you, you can rest assured they will send it to you.

If, on the other hand, the State of New Jersey has excess tax money that is due to you they will keep it a secret and hope you do not find out about it - so they can keep the money to use to continue to fatten the State’s politicians and their “cronies” and supporters.

I recently learned of a situation – but first some background reminders:

As you know, in 2008 the resources of the IRS were pushed to the limits in sending out George W’s “stimulus” rebate checks.

The checks were based on information taken from the 2007 federal income tax returns.

The minimum rebate was $300 per person ($600 for a married couple) and the maximum was $600 per person ($1,200 for a married couple).

The rebate was a refund of federal tax liability, after all credits except the Child Tax Credit. If your tax liability as a married couple for 2007 was “0” the most you would have gotten was $600. If a couple’s 2007 tax liability was $5,000 they would have received a $1,200 check.

You would also receive $300 for each dependent child under age 17.

And, as with most tax benefits these days, the amount of the check was reduced based on AGI.

The 2008 check was actually an advance on a refundable tax credit on the 2008 federal income tax return. The actual credit was determined based on the 2008 tax information. If the check you received was more than you were entitled to you got to keep it (What a Country!). If the check you received was less than the actual credit allowed you could use the difference to reduce your 2008 balance due or increase your 2008 refund.

If you were entitled to $1,200 but got only $600 you would enter $600 to the bottom of Page 2 of the 1040 (or 1040A) - which was treated as additional tax withholding or payments.

So here is the situation –

A married couple, retired and receiving Social Security benefits, had a 2007 federal tax liability of ”0”. They received a $600.00 “stimulus” check from George W in 2008.

For 2008 their tax liability was $17,000+, due to substantially increased taxable income from an excessive IRA withdrawal. However, they did not claim the $600 additional “recovery rebate credit” to which they were entitled on their 2008 Form 1040. There was a balance due on the return, which was paid in full by the April 15th deadline.

The couple just got a check in the mail from the IRS for $600 – which represents the additional “stimulus” rebate amount to which they were entitled. They received this separate check even though they did not request the additional $600 on their 2008 Form 1040!

So it appears that if, for some reason, you, or your tax preparer, did not claim any additional “recovery rebate credit” to which you were entitled on your 2008 tax return Sam will send it to you anyway!

Kudos to the IRS! The NJ Division of Taxation should be so ethical.


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