Wednesday, March 12, 2008

Handling Tax Stimulus Returns in TaxWise

March 12, 2008

When the issue of TaxWise rejecting 2007 Income Tax Returns for the purpose of the Economic Stimulus Package came up, IRS Relationship Manager emailed all coodinators in Santa Clara County on Feb 19, 2008 that VITA HQ was studying the problem of what to do when Tax Wise returned an error for $0 AGI returns.

On Feb 27, 2008 an mail indicated that VITA HQ "has NOT endorsed the creation of phantom income ($1 interest income for instance) in order to force tax wise E-file. Paper filing is the recommended option." We were also advised to "Please do stay clear of advising the taxpayer on any kind of computation in terms of how much they will receive. Let the May 2008 notices take care of this.'

On Mar 3, 2008, the IRS sent out the following advisory "RP-2008-21 provides that the Internal Revenue Service will not challenge the accuracy of income tax returns filed in compliance with Notice 2008-28 by eligible individuals who enter $1.00 in adjusted gross income solely for purposes of effectuating the electronic filing of the return. This document will be published in IRB 2008-12, March 10, 2008"

In various reports in the media, and the IRS website, this appears to have been confirmed. It is allowed to do the $1.00 return without fear of the IRS rejecting the return if all other items are correct. It also appears to suggest that entering data into other boxes to meet qualifying income requirments may not meet the scrutiny that is otherwise in place.

So what to do? Guess it means that a place needs to be found to put in that $1 of bogus non-existent qualifying income to generate that $1 in AGI income. Should it be under wage income, unearned income, interest income or misc income?

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