Common error delays tax refunds
That's why the IRS is warning people about a common mistake that could delay their refund, according to a press release.
The crux of the problem is that people aren't sure how to calculate their Recovery Rebate Credit. In some cases, they're confusing the new Recovery Rebate Credit with the last year's stimulus payment or they're overriding their tax software because they think it's in error.
Q: What's the problem?
A: People are making errors in the way they report their stimulus payments, and it's delaying their refunds.
Q: What stimulus payment?
A: You remember—the government last year sent people money to make the economy go. The maximum amount for individuals was $600 and $1,200 for married couples who filed together. Another $300 was added for each child younger than 17 years old.
Q: So, again, what's the problem?
A: Tax forms ask people to record their Recovery Rebate Credit. It's line 70 of Form 1040, line 42 of Form 1040A and line 9 of Form 1040EZ.
People are recording their stimulus payment amount on that line. But the Recovery Rebate Credit is not the same as a stimulus payment.
In other cases, people using electronic software are overriding the system because they think it's wrong, or that it lowers their refund.
Q: So, what should people be putting on those lines in their tax forms?
A: The amount of their Recovery Rebate Credit.
Q: What's that?
A: You might qualify for a Recovery Rebate Credit if you:
-- Didn't receive a stimulus payment in 2008.
-- Had a child in 2008.
-- Made more or less in 2008 than you did in 2007.
-- Ceased to be claimed as a dependent by someone else in 2008.
Q: How do I figure out how much my Recover Rebate Credit is so I know what number to put on that line in my tax form?
A: Use the recovery rebate credit worksheet available online or in your tax booklet. You'll need to know the amount of stimulus payment. If you don't remember the amount, go to www.irs.gov and use the "How much was my stimulus payment?" link. Or call the IRS tool-free at 1-866-234-2942.
In both cases, you'll need your Social Security number, 2007 filing status and the number of exemptions you claimed.
Q: Can't you make it easier?
A: Yes. If you're doing it it on paper, just write "RRC" in the space for the Recovery Rebate Credit. Or, claim a zero if you're using software. In either case, the IRS will figure it out for you.
Q: What if I've already sent in my forms and I filled in the wrong amount?
A: It might delay your refund up to about a week.