Economic Stimulus Rebate

[susieq]

If an individual owes taxes for 2007 and cannot pay the total at this time, what will happen to the rebate that has been calculated ? Single with tax + $600.

Another person called just now - she only has Social Security from her deceased husband. She has a 16 year old son who also receives social security. She actually receives the 1099 in her name for "john smith". Is this SSI - understand that this is not an eligible source of income.

[JohnH]

The rebate will be applied against unpaid taxes. I've had some people who short-paid on their return this year because we are expecting the rebate to offset against the balance due. All it will cost them is a month or so of interest & FTP penalty on the $600.

[Koss]

Social Security Benefits

The benefits she receives in connection with the death of her spouse are qualifying income for purposes of the stimulus payment.

First:

She actually receives two social security checks each month. One for her and one for her son. The one for her son bears her name because her son is a minor and she is managing the funds for him. But that money legally belongs to her son. Theoretically, that money is qualifying income for her son for purposes of the stimulus payment. But her son isn't eligible because he is her dependent. The benefits belong to her son, but she receives the check on his behalf. That money doesn't count as qualifying income for her.

The check that she receives for herself counts--assuming that it adds up to at least $3000 throughout 2007.

In other words: Don't add the two amounts together.

Second:

The payments she is referring to are not SSI. SSI is Supplemental Security Income. What your caller described is Social Security Survivor Benefits.

SSI and Social Security are two totally separate programs. The confusion arises from the fact that SSI is managed and administered by the Social Security Administration, and some people actually qualify for both.

There are three types of Social Security. All three types are qualifying income for the stimulus payment. All three types generate a Form SSA-1099. And all three types are potentially taxable if the taxpayer has enough income from other sources. The three types are:

(i) Social Security Retirement Benefits
(ii) Social Security Disability Benefits
(iii) Social Security Survivor Benefits

All three types of social security are based on the lifetime earnings record of the taxpayer, or the taxpayer's spouse, or the taxpayer's deceased parent. The amount you get is based on the earnings record. This is true even for Social Security Disability Benefits. A disabled person who has no earnings record or an insufficient earnings record is not eligible for Social Security Disability Benefits.

Supplemental Security Income is for people who are disabled AND low-income. SSI is for people who can't work and can't make ends meet. It is a federal welfare program. It is based on financial need--not on the earnings record. In contrast, social security is based on the earnings record, and not on financial need. If you have the earnings record, you get social security even if you have a gazillion dollars of income from other sources. SSI is available regardless of your earnings record. To get SSI, you have to be disabled and poor. But it doesn't matter how much you worked before you became disabled. SSI does not generate an SSA-1099, and it is never taxable.

Social security is a retirement program--just like an old-fashioned pension plan at General Motors. (Yeah, right. That's part of the reason they're bankrupt.) Some people retire early on disability. And other people die, and their spouses and children receive the pension payments that they would have received if they hadn't died. Social security is taxable when your income from other sources is high enough. But that income will never disqualify you from receiving the social security that you are entitled to based on the earnings record.

SSI is not a retirement program. It is a federal assistance program for the needy. It is never taxable because it is not even income. It has a status under the tax law that is actually very similar to food stamps. It is a nontaxable gift from the government. You get it because you are poor. You get it because you need it.

Social security is not a gift. It is an entitlement, in the technical sense of the word. You don't get it because you need it. Even though you may not need it, you get it anyway because you earned it by working.