Trouble in Stimulus Land

Taxwise put out a release that said unless the amount on Line 70 matches the IRS database the return will be rejected. The amount that has to match is not necessarily what was received. The amount received could have been less or nothing due to back taxes, liens, back child support, etc.

Here is the IRS website for checking the amount in the database:

"Phil Marti" wrote

My tax software provider sent out an email late last week that indicated that at least one RAL bank would not accept loans that showed any Line 70 amount and they placed the decision on the additional checking time by the IRS.

"Phil Marti" wrote

I went back to see the email on the subject and here's the meat of it:

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.......at least one BANK will begin DENYING RAL requests on any return with Recovery Rebate Credit. Based on information from IRS, it is better to claim ZERO than to claim the wrong amount. If a taxpayer claims ZERO, and is entitled to an RRC, the IRS has indicated they will credit the taxpayer with the correct RRC, and adjust the refund or balance due accordingly. But if they claim the WRONG AMOUNT, then their REFUND will DEFINITELY BE DELAYED. Based on this new information from IRS, our recommendation is to NOT claim the RRC on any return, unless you have verified the amount of the RRC at the IRS Website.

Thanks, Paul. The only thing missing is an explanation of why it will delay the refund if there's an incorrect line 70, but not if IRS has to calculate the amount. It seems to me that they'd have to check the same records in both cases, basically completing the worksheet based on the 2008 return to calculate the credit, then going to the record of advance payments to subtract the amount already paid.

As I understand the current situation, it is not just incorrect amounts claimed, it is for ANY return claiming the credit--banks will deny RALs and though the IRS will accept the return, the refund will be delayed--you can elect to not claim the credit on the return and the IRS will calculate the credit and send payment (in approx. 4 weeks).

Who ever said there won't be a delay (in receiving the RRC) if the IRS has to calculate the amount (of the RRC)? Since when does the IRS correct math errors within the 8-15 day time window for issuing refunds?

As we know, the e-file return will be rejected if the advance amount already paid does not match. However, since the IRS has noticed extremely high error rates with the additional credit claimed on the

2008 return, they are moving any such returns into an error processing queue for manual review.

IRS is expected to provide further information by Wednesday. As has been mentioned, if you claim zero for RRC on your e-filed return, you will get whatever remaining refund you are entitled to on the regular schedule, then the IRS will calculate the additional amount of the RRC and send that to you via the same method you received the original refund (check, direct deposit, etc). This is similar to the treatment received by those who under-report withholding, estimated payments, and so on, AFAIK.

To date, the likelihood of a taxpayer obtaining a short-term loan based on stimulus payment or RRC is at zero percent. Another blow to the banking industry! ;-)

-Mark Bole

"Mark Bole" wrote

So later on, in another month or three, the IRS will issue basically a correction notice that says "We've corrected your return.....here's the rest of your RRC money" or something like that.

The first good news I've had about this. There are too many different stories floating around. Hopefully all will be clear by the time our VITA site opens the 7th.

If you use Taxwise S/W at that site, here is how Rel 23.06 works:

The only time an RRC will be calculated and posted from Line 29 of the Worksheet to Line 70 of the 1040 is when you check the box on Line 28 of the worksheet signifying that no ESP was received. If you enter any entry (even a correct entry) on Line 28 of the worksheet (Amount of ESP Received), TW computes the RRC but does not post it to Line 70 of the 1040. This is consistent with the new IRS instructions. The IRS only wants e-filed returns that have an RRC on Line 70 for taxpayers that did not receive an ESP. Any taxpayer that received an ESP and is entitled to some amount of RRC will have that amount calculated by the IRS and the amount will be sent to the taxpayer at a later date.

The net of all this is that you should only have an RRC on the tax return for taxpayers who either did not file a 2007 tax return or if they did file, the ESP was zero.