More tax rebate questions answered

The Baltimore Sun

Last week's column about the IRS trying to clear up confusion over the tax rebates generated still more questions from readers.

This week, the IRS is making another effort to get the word out on rebates, which are part of new legislation to help the economy.

Beginning this week and continuing for the next two, the IRS will mail letters to more than 130 million taxpayers to remind them to file a 2007 tax return. That's one of the requirements for getting a tax rebate.

The agency will follow up in late March with another letter to certain recipients of Social Security and Veterans Affairs benefits.

Many recipients don't file a tax return because these benefits generally aren't taxed.

But if they have at least $3,000 in benefits and earned income, they must file a return to get a rebate.

Meanwhile, all your questions have been forwarded to Jim Dupree, the IRS' point man in Baltimore.

His answers are posted on our blog, Consuming Interests, at http:--weblogs.baltimoresun. com/business/con- suminginterests/blog/.

Here are some of those answers:

Will individuals receive a rebate if they owe federal taxes and are paying them on an installment plan?

For this purpose, the stimulus payment is treated like any other tax refund. This means that part or all of your payment may be used to pay past-due federal or state income taxes or no-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.

On a joint return, does each spouse have to have qualifying income to get the rebate?

No. If the joint return has a combined income of at least $3,000 and both spouses have a valid Social Security number, they should qualify.

My spouse and I have divorced and the stimulus payment check will be made out to both of us. Can I cash it?

If the check is made payable to both of you, then both must endorse the check.

By law, each spouse is considered to receive half of the payment in cases where a joint 2007 return was filed.

If the filers chose to have their tax refund directly deposited into a bank account, the stimulus payment will be deposited into that account.

If parents are divorced, how will the IRS know who the child lives with for tax rebate purposes?

In the case of a divorced couple, entitlement to the $300 child rebate follows the rules for entitlement of the regular child tax credit.

The normal rule is that the custodial parent claims the credit, unless a court-filed agreement between the parties specifies otherwise.

If an individual dies, what happens to the stimulus check?

Stimulus payments will be issued in the name of the individual eligible for payment on a filed 2007 income tax return or to the account designated by the individual on that return.

Any issues or concerns involving a decedent's filed return or the related stimulus payment should be addressed by the legal representative of the decedent's estate.

Do government retirees on the Civil Service Retirement System and Federal Employee Retirement System plans receive rebates as other W-2 wage earners?

In general, CSRS and FERS annuity payments are considered taxable income. These retirees will be eligible to receive a payment if they had at least $3,000 of qualifying income in 2007.

Does it make a difference if I use a 1040 or 1040A (to file a tax return)? The library had only a 1040 form.

You can use the 1040 form. Recipients of Social Security, certain Railroad Retirement and certain veterans' benefits should report their 2007 benefits on line 14a of Form 1040A or Line 20a of Form 1040.

Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X.

I filed early this year even though I owed money to the IRS. However, this meant that I didn't show any bank routing information. Is there any way that someone like me can arrange for direct deposit now?

Taxpayers who filed earlier and did not fill out the direct deposit line on their return will receive a paper check by mail.

To suggest a topic or share tips with readers, contact Eileen Ambrose by e-mail at

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