Discussion:Method of Economic Stimulus Payment for Balance Due TP
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Discussion Forum Index --> Tax Questions --> Method of Economic Stimulus Payment for Balance Due TP
| 2 April 2008 | |
| Everything I read seems based on taxpayers getting refund -- if they choose direct deposit for refund they will get ESP by direct deposit; if they choose paper check for refund they will get ESP by paper check.
How about those lucky few who have a balance due return. Assuming they have paid in full, will it make any difference if they paid by draft or by check? I would assume Sevice knows it has valid RTN/Account numbers if they have just drafted the account and could direct deposit if they wanted to. I can't seem to find anything definitive on how they will disbuse based on balance due returns. Anyone with any thoughts (and perhaps a reference)? | |
Taxestaxes (talk|edits) said: | 2 April 2008 |
| According to IRS website, even if a taxpayer owes, they can put in direct deposit info and that way their stimulus payment will be direct deposited-check out IRS website, Q&A section for Stimulus. | |
| April 3, 2008 | |
| One question I'm getting is what happens to the ESP if balance due return is filed AND the balance isn't paid before the ESP is supposed to be issued. No, I haven't gone to the IRS website because I don't really care (I'm reaaallly tired of this ESP), but I'm telling clients that the IRS will most likely offset the balance due with the ESP....seems to me that's what they did back in 2001. | |
Rgtaxservice (talk|edits) said: | 3 April 2008 |
| My read is that the IRS will withhold the rebate to offset any tax debt. I have a client with a balance due that is intent on paying the bal due less the rebate at time of filing and having the rebate applied to the remainder. | |
Taxestaxes (talk|edits) said: | 4 April 2008 |
| I would let them know that interest will accumulate and probably penalties, so they might get a bill even after their rebate is kept...... | |
| 4 April 2008 | |
| Thanks for the reference to the IRS Q&A. I had read it earlier but it has been updated with more information. Seems like if you only selected Direct Debit (to pay the balance due) you will get a paper check. If you select Direct Debit, you also have to select Direct Deposit (even though there is nothing to deposit) to get the ESP direct deposited.
I don't think my tax software orginally allowed selecting both Direct Debit and Direct Deposit (previously a logical impossiblity) but I see it has been patched to allow this. But tough luck for my balance due clients I have already filed. From [[1]] Q. I chose direct debit to pay my tax bill. Will my stimulus payment be direct deposited to the same account? A. No, the account information used for an incoming Direct Debit payment to the IRS cannot be used as the account information for the Direct Deposit of the stimulus payment. People who choose Direct Debit to pay a balance due will receive their stimulus payments by paper check through the mail. [Updated 3/3/08] Q. I plan to choose direct debit to pay my tax bill. I know my economic stimulus payment will not automatically be direct deposited based upon the Direct Debit information I've provided to pay my tax bill, but can I also enter Direct Deposit information to receive my stimulus payment by Direct Deposit? A. Some tax preparation software will allow this, some will not. You will have to make this determination based on your own review of the tax preparation software you use. If the tax software allows you to enter both Direct Debit (Electronic Funds Withdrawal), as well as Direct Deposit information, doing so will allow your economic stimulus payment to be Direct Deposited. [New 3/20/08] | |
| 16 July 2008 | |
| I have noticed from several clients that if a taxpayer has a balance due for 2007, the rebates are being applied to 2007, even if they have balances due for earlier years. That is not how typical refunds are handled. | |
| 16 July 2008 | |
| I just received a notice for a client which showed the same thing - applied to 2007 balance, not to 2004 (or 2005 or 2006) balance. | |
Death&Taxes (talk|edits) said: | 16 July 2008 |
| Perhaps because the stimulus is based on 2007 tax rates, though supposedly for 2008?? It was adopted too late to change the 2007 forms, but had it passed in late 2007, it might have appeared on the 1040. | |
| 16 July 2008 | |
| Refunds applied to prior years are always based on the tax rates of the current year. Maybe it is to reduce the number of injured spouse claims. It seems to me it had to be a conscious decision and not an oversight. | |
Death&Taxes (talk|edits) said: | 16 July 2008 |
| What I mean is that if client owes 1850 for 2007, and would have a 1500 rebate had the calculation appeared on the form, the application to 2007 makes sense....treated almost like withholding. Remember the Excise tax refund was applied to 2006 though it was for years 2003-06.
Do you have any where the rebate is more than the balance due for 2007? How were they applied after the application to 2007? | |
| 16 July 2008 | |
| I see your point. If I have seen a rebate larger than the 2007 baldue, I did not notice it. | |
| 16 July 2008 | |
| The rebate is actually treated as a payment made by the taxpayer for the 2007 tax year. See Internal Revenue Code ยง 6428(g)(1). Thus, the Service would be required to apply the rebate to 2007, before applying any amounts to prior years. | |
| 17 July 2008 | |
| As I have completed 2007 extended tax returns with balances due, I have been telling my clients that they must pay their balance due first, then they will receive their ESP.
It appears from this discussion this is not the case. But I wonder, say taxpayer owes $3000 with $60 in late payment penalty and interest through June 30, and pays it. Does the IRS apply, for example's sake, his $600 ESP at April 15, meaning he is really only underpaid by $2400, then recalculate the P & I and refund the overpayment of P & I? But back to main topic, if in the example the taxpayer files his tax return on June 30 and does not pay the $3060, does he receive a notice that shows $3000 tax due less the $600 ESP plus recalculated P & I? | |
| 17 July 2008 | |
| To answer the last question - that is exaclty what you receive. It will be a CP22A. | |
