Tuesday, June 24, 2008

ARE YOU ONE OF THE MISSING 5 MILLION?

Testifying before a Congressional hearing about the “stimulus” rebates last week IRS Commissioner Shulman reported that 5 million retirees and disabled veterans qualify for an economic stimulus payment but have not yet filed a 2007 return to claim their payment.

In launching a special summer campaign to reach these individuals the IRS reminds us, “A special stimulus category includes recipients of certain benefits from Social Security and Veterans Affairs who do not normally have a requirement to file a tax return. However, these individuals must file a tax return before Oct. 15 this year to receive their economic stimulus payments.”

If you normally do not file a federal income tax return because your taxable income is below the filing threshold and you receive regular or disability-related Social Security, Railroad Retirement or Veterans benefits of at least $3,000, or you know someone who fits this description, you, or they, are entitled to a rebate check – but you, or they, must file a 2007 federal income tax return in order to get the check.

FYI, Supplemental Security Income (SSI) is basically a welfare payment and does not count as “qualifying income” for the “stimulus” rebate. If you receive only SSI, and no other Social Security, Railroad Retirement or Veterans benefits or other qualifying income such as wages reported on a Form W-2, you are not entitled to a rebate.

If you have not already filed a 2007 federal income tax return you still have time. You should file a Form 1040A reporting the gross amount of Social Security, Railroad Retirement or Veterans benefits on Line 14a. The return should show “0” taxable income and “0” tax liability.
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Write “Stimulus Payment” across the top of Page 1 of the Form 1040A. Even though you are not requesting a refund on the Form 1040A you should provide the appropriate bank information on Lines 44 (b), (c) and (d) if you want your rebate check directly deposited to your bank account.

You must file the 2007 federal income tax return by the October 15th due date for extended returns in order to get a check this year.

Make sure you file only one 2007 federal income tax return!

I have clients, a couple both in their 70s or 80s, who normally file a joint Form 1040 each year to report rental income and expenses on Schedule E. They have taxable interest and pension income and also receive non-taxable, due to their level of income, Social Security benefits. While they generally have a “0” tax liability after deducting the rental expenses and the Standard Deduction and personal exemptions, they still have to file because the “gross rents” puts their total income above the filing threshold.

They also regularly attend meetings of a senior citizen group at the local Senior Center. At one meeting the “stimulus” rebate check was discussed and they were told they had to file a Form 1040A to get the rebate.

A few weeks after I had prepared their 2007 Form 1040, and given them a copy, I got a call from the husband asking if I was going to send them a copy of their Form 1040A. I told them they did not file a 1040A but a 1040, and I had already given them a copy the of completed 2007 return.

No, he did not mean the 1040. He acknowledged that he had a copy of the 2007 Form 1040 that I prepared. He was talking about the Form 1040A he was told had to be filed in order to get the George W rebate check!

You must file a 2007 federal income tax return, be it a 1040, a 1040A or a 1040EZ, to get a rebate. But only one income tax return is required. One return covers both your regular income tax obligation and the application for the “stimulus” rebate! You do not have to file a second federal income tax return, a separate Form 1040A, to apply for the rebate!

Any questions?

TTFN

FYI- Check out today’s posting at THE FLACH REPORT titled “Call Your Tax Guy First”!

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