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 the 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.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
The Stimulus package was to go the the people
to spend. It was to help the economy. Nothing was ever sad, that the IRS would take the money to pay for current taxes or past due taxes. This is not a IRS Stimulus package. They should of sent out the checks from a Stimulus account, not the Treasury, so the IRS can take your money… They should of sent out notices
to the Tax Payers the IRS can take your checks.
Where is the “LAW” here !!! The People Law… you said everyone would get a check. to spend as you like !!! This is the ‘People Stimulus Package” The next one, will they mail it to
your credit companies or how about paying the electric bills ?? Who is next in line to seize this money ????