Stimulus rebates for the Amish

[LCP]

One of my clients just received one even though they don't pay SE tax.

The IRS site says that to estimate your rebate you should include your SE income. Perhaps they do have SE income but are just exempt from the tax.

Our Ultratax software does a projection that starts with taxable income and subtracts non-qulifying income. It doesn't subtract the earned income on which SE tax doesn't apply.

Hopefully their calculation is correct and the IRS check is also correct

[joanmcq]

SE tax doesn't figure into the stimulus calc, just earned income, SS (which your Amish wouldn't have), tax & kids. I figure earned income is earned income, whether or not you pay SE on it.

[Bees Knees]

I disagree

TTB updates says the following about earned income for purposes of the stimulus payments:

Earned income. The term earned income has the same meaning as earned income used for purposes of the Earned Income Credit (EIC), except that:

• The election to treat combat pay as earned income for purposes of EIC, which expires
after 2007, shall apply for 2008 for purposes of the Section 6428 credit, and
• Net earnings from self-employment which are not taken into account in computing
taxable income shall not be included in the definition of earned income for purposes
of the Section 6428 credit.

Example. Jerry is a minister who receives a parsonage allowance that is
not subject to income tax, but is subject to self-employment tax. For EIC
purposes, the parsonage allowance is considered self-employment earned
income which may qualify Jerry for the EIC. However, for purposes of the
Section 6428 credit, the parsonage allowance is not considered earned
income.

IRS Pub 596 says the following about earned income for purposes of EIC where the taxpayer claims exempt from SE tax:

Approved Form 4361 or Form 4029

This section is for persons who have an approved:

• Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers,
Members of Religious Orders and Christian Science Practitioners, or
• Form 4029, Application for Exemption From Social Security and Medicare Taxes and
Waiver of Benefits.

Each approved form exempts certain income from social security taxes. Each form is
discussed in this section in terms of what is or is not earned income for purposes of the
EIC.

Form 4361. Even if you have an approved Form 4361, amounts you received for
performing ministerial duties as an employee count as earned income. This includes
wages, salaries, tips, and other taxable employee compensation. Amounts you received
for performing ministerial duties, but not as an employee, do not count as earned income.
Examples include fees for performing marriages and honoraria for delivering speeches.

Form 4029. Even if you have an approved Form 4029, all wages, salaries, tips, and
other taxable employee compensation count as earned income. However, amounts you
received as a self-employed individual do not count as earned income. Also, in figuring
earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7
of Form 1040.

So if the Amish earn self employment income and claim exempt from SE tax using Form 4029, the income is not earned income for EIC purposes, nor is it earned income for the Stimulus payment.

[MAMalody]

An easier way to think of this, maybe, is that the Stimulus payment, as I recall, is based upon net income tax liability which is line 57 of the 1040. That does not include SE tax. It is only if you do not have a net income tax liability that you have to worry about income. At that point, you only include SE income that is included in computing taxable income. So, essentially, there are two questions:

1. Is it included in income tax
2. Is is used to compute income tax

There may be other nuances, but then we can always go to the IRS web site and use the calculator.

It works for me, I think.

Mike

[SunTaxMan]

Amish and stimulus payments

I do not currently have any Amish as clients, but the experience I have had with Amish leads me to believe is that their attitude would be, "We don't want government 'hand outs'," and that they would refuse to accept these payments.

Over the years, I have had some Amish refuse to accept Earned Income Credit (in those rare occasions when they were entitled to it!). As I understand it, this is their reason for non-participation in the SS program.

I realize human nature is as variable as always, regardless of the attire worn or beliefs subscribed to. It would be interesting for me to hear of Amish who will accept, or have accepted, these stimulus payments.

Am I that naive?

[LCP]

This isn't a government handout by my way of thinking.

It's a change in the way that 2008 taxes are calculated and the change is being rebated in advance to help the economy.

[joanmcq]

But if you don't pay taxes you may still get a stimulus.
If you are overpaid per 2008 taxes you don't have to pay it back.
So its a handout.

[SunTaxMan]

Amish and "government hand outs."

My thinking was not as to a strict definition, but rather to perception by the Amish.

No matter how you describe it in the fine print, the perception is the issue.

Regardless of our "semantics" discussion, have any of you had experience with Amish who have accepted or rejected these payments and, if rejected, what was the reason given.

Thanks,

[JohnH]

My rebate isn't a handout - it's a partial refund of a gross overpayment for substandard services. It is a handout for some people, but by and large it's a small rebate of excessive taxes which have previusly been confiscated by the immoral system our politicians have created.

I don't have any Amish clients here in Southern Baptist country, but here was an interesting discussion I ran across:

http://www.oasisnewsfeatures.com/new/node/1147

[Bees Knees]

My stimulus is not a hand out. It is education. The government insists on creating complex tax rules, and my job is to make those rules understandable to my clients. I need to experience first hand what they are going through in order to improve my job skills.