2008 Stimulus Payments: Direct Deposit

Not quite, Mr Moderator. His checks will be in the mail.

ChEAr$, Harlan

The really neat thing is, all those who did RAL's, have to wait on a paper check to be mailed.

Are you sure? IRS has said that if you authorized direct debit of your 2007 bal due you'd get direct deposit of the prebate, and they specifically said that people filing the "stimulus only" returns would get direct deposit of the prebate if they filled in the blanks.

OP didn't indicate how the 2007 balance was being paid, but even if he had, I haven't been able to find anything from IRS saying how prebates will be issued to people who filled in the bank account spaces on the 1040 but paid by check or through EFTPS.

Meanwhile, on the "Let's all look forward to next filing season" front, in addition to the blank stares when we ask people whether they got their prebate, we'll also have the one-year-only special penalty and tax-free "oops" withdrawals from IRAs where the prebate was inadvertently sent there.

I may take up drinking earlier next year.

Just received a notice of an announcement from IRS that some taxpayers had their refunds sent to their IRA accounts not realizing that the stimulus payment would also go to the IRA account. IRS has now advised that the stimulus payments can be withdrawn from the IRA account without penalty until April 15, 2009, or October 15, 2009, if an extension for the 2008 tax return was filed.

Cheers,

WDK

"Phil Marti" wrote

Before lunch instead of after dinner?

None of my clients made a DD into a tax deferred account. They paid any contributions to IRA's, etc by separate check.

But you're right, most won't know what they got. I suppose on those we'll just trust the default amount and hopefully the IRS will add any extra on their end.

wrote

Bill. Don't you think that we, the tax preparer community, won't allow any more IRA contributions to be direct deposited on the extended returns we may file between now and October?

Mead, perhaps? Or some of Harlan's single malt Scotch?

Harlan, See

which is designedfor someone not receiving any income tax refund. It clearly states thatif the bank information is present, the stimulus rebate goes there evenif no tax refund. Mr. Moderator gets points for this one. In a subsequent Q&A the IRS said if you used form 8888 to specify more than one direct deposit account, then a paper check would be mailed.

Seems that every week there's more guidance put out by IRS on what will happen or not happen. My comment was based on what they first said. So hard to keep up these days. Especially since my tax software didn't allow for such bank account information input.

ChEAr$, Harlan

And to clarify, my tax software is Taxwise (tm), which is used nationwide by IRS sponsored AARP and VITA volunteers.

C$, H

Paul:

We are now in the extention period for filing 2007 tax returns. My comment refers to October 15, 2009, which is the end extended filing period for 2008 tax returns. Go read what is available on

on this issue.

Cheers,

WDK

wrote

And tell me, how many IRA contributions do you allow after April 15th?

I think I am following this thread and you are talking by each other. I think the facts of the OP are:

Taxpayer had a 2007 refund due and elected a direct deposit to his IRA account which occurred before April 17 2008, making it a 2007 contribution.

Unknown to taxpayer the IRS will sometime during May-July 2008 make a stimulus payment to the same account because that is the account number they have on record. The taxpayer will now have an unintended 2008 contribution to his IRA which may or may not be wanted or could even put him over the contribution limit for 2008.

The IRS is allowing the taxpayer to withdraw that contribution that the IRS made without penalty.

The only problem I have with this is some taxpayers (who are far from retirement) just let ride what is in their IRA and don't monitor it often. If this happens to them, they might not even be aware that the stimulus is in their IRA.

Mailed a returned today, May 1, 2008, which showed a contribution to a SEP for tax year 2007. A timely extension had been filed for filing this return.

Here is IRS's Guidance on the treatement of stimulus payment that were directly deposited in a tax favored account.

2058,00.html Cheers,

WDK

...And don't forget: Those who qualify for a rebate based on the 2008 return and not on the 2007 (or get more w/r to 2008 than 2007) have to wait another 11 months. :-(

I might not be Bill, but "huh?" Why should that not be allowed or advised? Any taxpayer has the right to make his 2008 contribution from January 1,

2008 until the due date in mid-April 2009 from any source of funds in his control.

Financial advisors that informed their clients to put in their 2007 IRA contributions during January-April 2008 ONLY should be drawn and quartered. They should have advised them to contribute during 2007 if at all possible. However, note at how many financial institutions MISS informing their clients of such. It's so much better to contribute for the year on January

1 of THAT year, and if needed, reverse the contribution later if the taxpayer doesn't qualify than it is to WASTE a year's worth of earnings potential by waiting until after the close of the year to contribute.

Harlan: Taxwise issued an update (I believe it was "06" or "07") which permitted entry of Direct Deposit information even when no taxes were withheld and no refund was due.

There was an entry permitted under the code ESP on the "special instructions" line of the Main Information form. This code was added to the dropdown menu, which included military combat and other special treatments -- actually adding it to the top of the list.

This code enabled entry of Routing and Account numbers on page 2 of Form

1040, even when there was no refund. Of course, it was always possible to enter such numbers on the Main Info -- regardless of the eventual disposition.

Of course, were an "automatic withdrawal" directed (often for April 15 payment), using the ACH form option, the same banking information would be available -- and we were advised to encourage TPs to choose that option in order to ensure earlier distribution of their "stimulus rebate." Toward that end, the timetable from the IRS website -- showing Direct Deposit dates vs. mailed check distribution targets -- was provided to all preparers, and became a prime "selling tool" for ACH payments by a great many people who traditionally had opted for Form

1040V, with the intention of mailing it on April 15. [Direct Depost stimulus payments were to be distributed during the first 3 weeks of May

-- while mailed payments followed a much longer schedule, ending in August.

It appears that the combination of the earlier receipt of the "stimulus" with the savings of postage and removal of an additional action requirement, all added up to an irresistible argument in favor of auto-withdrawal, via ACH. (At least it did, at our library site, with over 500 returns prepared.)

Bill

"D. Stussy" wrote

You're not going to let someone make a 2007 IRA contribution after April

15th, 2008. It's not permitted. That's the premiss of my position.

You've been in this business longer than me I suspect. How often does the client not tell you of a possible offset - that they're not going to get that overpayment refunded? How often do they say "Yeah, I made all the estimated tax deposits you gave me" and that turn out to not be true? How often does the IRS mess things up and mail a check instead of making a direct deposit?

And I have clients with the ability to make that contribution from their funds, that they control.

The assurance that it gets done, and done correctly and timely, can only be found by not depending on a third party to make a correct and timely deposit for you.

I'm not against making a timely IRA deposit, I'm against being dependent upon the IRS to do it for my client.

(most snipped...)

I remember something about that now, but was under impression that procedure only applied to so called "stimulus" returns, wherein you enter the social security amount and one dollar for processibility.

Now you're telling me that I could also have entered my direct deposit information for direct deposit of my "stimululating" stimulus payment even though I owed and mailed them a check?

Actually, it's not so much "my" stimulating stimulus payment since I promised it all to wife for household discretionary spending ifyouknowwhatImean!

ChEAr$, Harlan

Of course not. However, I certainly would let (or advise) them to make a

2008 contribution during that period. I don't see a problem unless you're saying that the stimulus DD is being declared as a 2007 contribution - but how could it be? It can only be a 2008 contribution.

Not just the IRS: For the past 2 years, the California FTB has been unable to direct-deposit my personal refunds despite the fact that the numbers for RTN and account are identical to the ones used by the IRS to successfully deposit my personal federal refunds. The boneheads at FTB even wrote me a letter saying it was my fault - clearly not considering the IRS' success with no more or less information.

This year marks 20 years in the tax industry for me (IRS and private practice times combined).

Considering that the stimulus "checks" can only be issued during 2008 (May-December), I don't see how the DD version could be untimely as a 2008 contribution?