Ask the taxgirl: 2007 Liabilities and Rebate Checks
Taxpayer asks:
We owed taxes for 2007 when we filed. We also had owed taxes from a few years ago. I was under the impression that the IRS would deduct the amount of taxes owed for any prior year(s) from the stimulus payment, but would not affect the 2007 taxes. We just received letters from the IRS stating that they first deducted the amount of taxes owed for 2007 from our stimulus payment. Then we received a second letter saying the remaining balance of the stimulus payment went toward taxes owed from a few years ago.
While it is nice to have the IRS almost payed off, it would have been nice to see a little bit of the stimulus payment. Could you clarify this please and also post it on your site if it is accurate because there is a lot of misinformation about this being printed, including on your site.
Taxgirl says:
If you owe federal liability for income tax from prior years, it will be applied towards your rebate check; this is settled.
If you owe for 2007, I am not 100% sure that it will be taken from your rebate check though I have advised folks to pay liability in order to avoid any problems.
I do not know for certain (maybe my colleagues could chime in) but my gut would be that those taxpayers with no prior year liabilities who are paying 2007 in an agreed upon installment plan might still be eligible for a rebate - I have nothing to base this on but anecdotes.
However, as you owe prior years - and I am guessing are not on a payment plan for 2007 - the IRS exercised the option to offset. Rebates and refunds are always applied to the most recent unpaid year first.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl!
–
This post is part of the b5media Business Channel Great Blog Off! Find out more about the Blog Off here.
The Business Channel is supporting Accion International for the Great Blog Off. You can make a donation directly to Accion. Donations are, of course, tax deductible.
