The IRS reported that an early sampling of this year’s tax returns shows great perplexity about last year’s recovery rebate. According to the Service, about 15% of all individual tax returns filed so far contain errors involving the recovery rebate credit.
The mistakes include returns that claim the credit when the taxpayer is not permitted to it, returns that claim the wrong amount for the credit, and returns that have the amount of last year’s rebate check improperly entered on the recovery rebate credit line (line 70 of the 2008 Form 1040).
The IRS sent out about 139 million recovery rebate checks last year, as provided by the Economic Stimulus Act of 2008, P.L. 110-185. The rebate represented an advance tax credit for tax year 2008 and was available to individuals other than nonresident aliens, dependents and estates or trusts.
On their 2009 returns, taxpayers must reconcile the amount they received last year in a recovery rebate check (if any) with the amount of the credit they were actually entitled to. If the amount of the check exceeds the amount of the allowable credit, the taxpayer will not have to recognize the excess as taxable income. If the amount of the check was less than the amount of credit the taxpayer is entitled to, the taxpayer will be eligible to claim the difference on the 2008 return.
The 2008 Form 1040 instructions include a worksheet for properly figuring the amount of the credit.
The mistakes include returns that claim the credit when the taxpayer is not permitted to it, returns that claim the wrong amount for the credit, and returns that have the amount of last year’s rebate check improperly entered on the recovery rebate credit line (line 70 of the 2008 Form 1040).
The IRS sent out about 139 million recovery rebate checks last year, as provided by the Economic Stimulus Act of 2008, P.L. 110-185. The rebate represented an advance tax credit for tax year 2008 and was available to individuals other than nonresident aliens, dependents and estates or trusts.
On their 2009 returns, taxpayers must reconcile the amount they received last year in a recovery rebate check (if any) with the amount of the credit they were actually entitled to. If the amount of the check exceeds the amount of the allowable credit, the taxpayer will not have to recognize the excess as taxable income. If the amount of the check was less than the amount of credit the taxpayer is entitled to, the taxpayer will be eligible to claim the difference on the 2008 return.
The 2008 Form 1040 instructions include a worksheet for properly figuring the amount of the credit.
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