Sched. M reject

[Super Mom]

I'm curious, I've not researched this subject any yet, I will on Mon. as I'm at home and my info is at the office. Late Friday night I had a return rejected due to the Shed M, it said that the recovery credit I claimed didn't match IRS records, as if a payment was received. However, that would have meant income I had no idea of. I called the client to see if they indeed got a payment and they did (he called me at home this weekend). Maybe he's under the assumption that it's not taxable income? Anyway, I just wondered if anyone out there is familiar with this type of situation. Isn't any of those things (that received the stimulus payment) taxable if they made a substantial other income? Once again, please forgive my ignorance, I'll research this on Monday and report any income that needs to be reported, I'm just spending the weekend thinking about this and I thought maybe some of you could share some similar experience! Thanks!!!!

[origun]

Possible disability or VA benefits

Your client might have received VA or SS disability benefits or SSI and received $250 in May or June. If that is the case, he/she would only be receiving $150 as MWP on Schedule M. I had this situation with a relatively young client so I didn't inquire about such payments but after a reject and a phone call, I found out that he had a small percentage of disability (5 or 10%) from VA so had received the $250 in '09. My software requires me to input any such payment previously received but I was negligent as he had no paperwork to indicate he might have been "disabled." Ever since, I have asked everyone if they have received any such payments (even if non-taxable so no tax documents).

[Burke]

Isn't any of those things (that received the stimulus payment) taxable if they made a substantial other income?

Am totally confused by your question. Can you re-phrase?

[David1980]

If they received the $250 it reduces the Sch M making work pay credit.

As far as the client not telling you about all their income, is that really a surprise? I think most taxpayers couldn't even figure out how much income they had. If it wasn't for information documents such as W-2's and 1099's I'm convinced nobody would ever know how much money they made. Heck, I cringe to think of how many have received less than $10 of interest and didn't report it to me because they never received a 1099-INT. Some things you just do the best you can with the information that is provided to you.

[Super Mom]

Am totally confused by your question. Can you re-phrase?

probably mainly for now is, is any of the VA pension or disability non-taxable income?

[Mike Mac]

I don't believe any of the Veterans Administration disability pensions are taxable for federal income tax purposes.

In MN there are some Property Tax benefits available that we have to know if our clients are getting any VA disability benefits but generally, we as preparers, are likely to be unaware that they are getting it.

[Black Bart]

Mom

probably mainly for now is, is any of the VA pension or disability non-taxable income?

The VA pension or VA disability is not itself taxable income, but VA paid all their people $250 in addition to their regular monthly benefits. If some of those people are also still working, then the $400 Making Work Pay credit they would get on their tax returns has to be reduced by that $250 and they'll get $150 instead.

The same applies for people on Social Security -- most of them (except some signed up in 2009) will have received $250 in advance and, again, if they work and file a return then their $400 credit will also be reduced to $150. Of course part of the SS becomes taxable if they make enough other money.

Ask your clients if they got SS or VA -- if they did there's a good chance they have already received $250 of the $400 credit. Also ask about SSI (never itself taxable or reported, but recipients got the $250).