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?

Handling $0 AGI TaxWise rejects

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"

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

Create those E-files early!

Feb 28 2008 Why creating those E-files early will simply life for you!


Creating the e-file before printing out the 8879s is helpful because that way the DCNs will appear on the 8879 rather than you filling it in by hand later in the tiny space available for it. However, you will need to assure your volunteers that it would not be the end of the world if the taxpayer changes his or her mind about e-filing with you. This fear of accidentally sending the e-file to the IRS seems to have its origin in the TaxWise training with undue emphasis on the importance of filling accurate e-files. Volunteers need to be given the confidence and the requirement to create an e-file even if it has to be changed later, so that you as the transmitter can be sure that at some point the return was ready for filing, and it will also help the volunteer get rid of some of those errors. The reality is that e-files need to be proactively sent rather than be sent automatically. The ironic part is that the login requirements for transmitting and accepting acknowledgements is much less stringent than for logging in to the TaxWise support website or TaxWise University.

State Returns after Federal returns and IT saavy volunteers

http://www.vita-volunteers.org/survival_guide_more.htm

Feb 27 2008. Read why it makes sense to file the State returns after the Federal returns are accepted, and how motivated IT Savvy Volunteers can help improve your operations.

Highlights of Economic Stimulus Act

http://www.vita-volunteers.org/Economic_Stimulus_%20Payments(Rebates).htm
Feb 20 2008: Highlights on information of the Economic Stimulus Act and the requirement that taxpayers need to file 2007 returns in order to qualify for rebates ranging from $300-$600 per taxpayer.