Rebate payment and offset for back taxes

[JoshinNC]

If a client has back taxes from a previous year or has a balance due for 2007 that is not paid in full by the time the rebate checks come out will the rebate be offset by the amount owed?

Haven't seen this addressed yet and just thought of it.

[S T]

thought of

Josh

I did think of it, so I am glad you posted. I have a few t/p's that have balanced owed.

I don't know the answer, but I would suspect that it will be applied to balance on the IRS account. I think we saw that on one of the last rebate programs.

Sandy

[JohnH]

I think it will be applied

I can't imagine IRS sending a check when there's a balance due showing in the system. I've even advised someone who owes about $1,000 and can't pay to just file the return with a partial payment and wait for the rebate to offset against their balance. It will cost them about $14 per month, but if they're lucky and are in one of the early waves they won't know the difference. Not that the $14/month matters since they don't have the $1,000 anyhow.

[ChEAr$]

The answer is yes

You can bet your sweet bippy that before a check goes out computers will check prior
balances.

Of course if taxpayer has a valid extension in the works for 2007, they can't offset what they
don't know about.

[JohnH]

No rebate check

True, but if there's an extension in effect there won't be a rebate check issued until the return is filed.

[ecb34691]

Not only IRS, but FMS of Treasury will offset for child support, alimony, student loans, federal loan debts, etc. For you that e-file, and debit indicator (DI) will be off-set. IRS is still looking at whether they will do injured spouse forms like they did in 2001 and 2004 on the child tax credit one of $400.

[BP.]

If a client has back taxes from a previous year or has a balance due for 2007 that is not paid in full by the time the rebate checks come out will the rebate be offset by the amount owed?

Haven't seen this addressed yet and just thought of it.

Two places on IRS website that mention this:

"FS-2008-15, February 2008

Stimulus payments will be subject to offset against outstanding tax and non-tax liabilities in the same fashion as regular tax refunds."

and:

"Stimulus Payments: Answers to Frequently Asked Questions

Updated Feb. 28, 2008

Q. I'm eligible for a payment but I still owe federal income tax from a prior year. Will my payment be reduced?

A. Yes. For this purpose, the stimulus payment is treated like any other tax refund. This means that part or all of your payment can be used to pay past-due federal or state income taxes or non-tax federal debt such as student loans and child support. If this occurs, you will receive a letter explaining how the stimulus payment was applied."

[JohnH]

Another interesting tidbit

Let's say a taxpayer owes money on his 2007 return. He files & pays by Apr 15 (either paper or electronically). He will be mailed a rebate check sometime between May and August.

However, if he enters his routing number and checking account number on his "balance due" tax filing, his rebate check will be direct deposited. Probably means he will get his rebate a little earlier.

So whereas we ordinarily would not worry about entering checking account info on a "balance due" return, this year the taxpayer will benefit by our entering that info if we want to take the time to do that.

(I didn't dream this up - it's explained on the IRS web site)

[Gretel]

Nice thought. I noticed though, that my software program will not print banking information if either, there is no refund, or there is a balance due, but taxpayers elects to pay by paper check instead electronic withdrawal.

[Jesse]

Let's say a taxpayer owes money on his 2007 return. He files & pays by Apr 15 (either paper or electronically). He will be mailed a rebate check sometime between May and August.

However, if he enters his routing number and checking account number on his "balance due" tax filing, his rebate check will be direct deposited. Probably means he will get his rebate a little earlier.

So whereas we ordinarily would not worry about entering checking account info on a "balance due" return, this year the taxpayer will benefit by our entering that info if we want to take the time to do that.

(I didn't dream this up - it's explained on the IRS web site)

I thought about that as well, but my software doesn't bring the account numbers forward to the 1040 w/ a balance due.

Another questions is the "injured spouses'" - will they receive a refund? I have a client who's spouse is behind on child support and we do the injured spouse so they do receive her portion of the refund. I'm wondering if they will intercept $1,200 or $600? Or what about the extra $300 if they have kids?

[Gene V]

Nice thought. I noticed though, that my software program will not print banking information if either, there is no refund, or there is a balance due, but taxpayers elects to pay by paper check instead electronic withdrawal.

You might check with your software for any update, my software (Lacerte) updated the program, so you can print the bank information for the rebate, even if you owe.

[ecb34691]

Indication is on injured spouse is 50/50 split. Maybe children split based on allocation on I.S. form.