Recovery Rebate Credit QuickAlert

[HV Ken]

FYI....

From: [email protected]

Subject: Individual Filers

Date: Sunday, February 8, 2009 1:43:17 PM [View Source]

ATTN: Software Developers, Return Transmitters and Authorized IRS e-file Providers/EROs:

Important message about computing the Recovery Rebate Credit

Key Message

The only way to avoid a delay in taxpayers' refunds is to put the correct

amount on the appropriate Recovery Rebate Credit line for Forms 1040, 1040A

or 1040EZ. Any other choice, either an incorrect amount, leaving the

Recovery Rebate Credit line blank or entering a zero (unless that is the

correct amount) will guarantee a refund delay.

Why?

During processing, the IRS compares the amount entered on line 70 (1040)

(line 42 for 1040A, line 9 for 1040EZ) to our records, if there is a match

the IRS processes the refund without delay. If the figures do not match,

the return is moved to a manual process in the IRS' error resolution

function during which time the correct RRC is computed and is then added (or

subtracted) from a taxpayer's refund or balance due.

How long is the delay?

At present, the manual process to compute the correct refund amount and

adjust the tax return is taking 1-2 days. The IRS has taken several steps

to ensure the minimum possible delay for refunds that end up in this manual

process. We anticipate that, even in high-volume periods, the maximum delay

as a result of an incorrect amount on line 70 (1040) (line 42 for 1040A,

line 9 for 1040EZ) will be less than a week.

How can taxpayers ensure they put the correct amount on line 70 (Form 1040)

(line 42 for Form 1040A, line 9 for Form 1040EZ)?

To ensure the reported amount for the recovery rebate credit is correct, the

taxpayer or preparer should use the IRS' application "How Much Was My

Stimulus Payment?" located on IRS.gov to compute the entry on line 70 (1040)

(line 42 for 1040A, line 9 for 1040EZ).

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This has been an IRS e-file QuickAlert

[TAXBILLY]

Now they need to notify the banks.

taxbilly

[David1980]

Now they need to notify the banks.

taxbilly

I thought about that. The banks by telling the preparers to leave 70 blank are going to create a delay when blank is not the correct amount.

However, and assuming the figures the banks gave were correct, it probably still makes sense. 3% of returns qualify, and 17% had it in error. So if they allow a RAL when it has it they'll have 17% of returns delayed while if they allow a RAL when it doesn't have RRC but should they'll have 3% of returns delayed.

I'd preparer it the right way and just not sell a RAL to a client with an RRC.

How the IRS should have handled this is to just distribute the non-RRC portion on time and only delay the RRC portion. It just doesn't make any sense that they delay the amount they know is correct to correct the amount they don't.

[TAXBILLY]

My opinion is that they should tell the banks not to give tax advice.

taxbilly

[Chowdahead]

They've got to be kidding me. So if a customer tells me they received their incentive check in 2008, I am supposed to go to their website and calculate it anway? Calculating the credit is way to complicated as it is in the program. I only do it when the client tells me they never received it. So if the program leaves line 70 blank, it delays the refund even if the person received their stimulis check?

And the IRS decides to come out with this on Feb 8? Sheesh....

[JohnH]

I checked the returns I've already filed, none of which are eligible for the RRC, and I noticed that the RRC line is blank. According to the memo, even the blank space will hold up the processing while they check it out. That's odd, since we aren't required to enter zeros on other lines which don't apply. These are paper-filed returns, so a delay of a day or two won't matter that much to them. But just to be on the safe side I guess I'll start entering the zero. (Wonder if the master can be modified to automatically enter a zero unless it's overridden).

[HV Ken]

That was how I first read it, too. But notice the clause: (unless that is the correct amount)

I think things will be fine the way they currently are in ATX.

I checked the returns I've already filed, none of which are eligible for the RRC, and I noticed that the RRC line is blank. According to the memo, even the blank space will hold up the processing while they check it out. That's odd, since we aren't required to enter zeros on other lines which don't apply. These are paper-filed returns, so a delay of a day or two won't matter that much to them. But just to be on the safe side I guess I'll start entering the zero. (Wonder if the master can be modified to automatically enter a zero unless it's overridden).

[Chowdahead]

That was how I first read it, too. But notice the clause: (unless that is the correct amount)

I think things will be fine the way they currently are in ATX.

Yes, but does that clause apply to the "leaving it blank part" or the "entering a zero part"? It reads to me like like all returns that have the line blank will need to be manually reviewed, and if a zero is entered it will need to manually reviewed, unless zero is the correct amount.

This might explain why my clients are seeing such a funding delay. I've got one a few clients who I e-filed back on January 24, and they still haven't seen their refund yet.

[Chowdahead]

This is what SBBT said on January 24:

Due to the high error rate associated with tax returns claiming a stimulus recovery rebate credit (RRC), the IRS has announced it will delay refunds claiming an incorrect RRC. The IRS has calculated that approximately 17% of the returns with this credit are either calculated incorrectly or are blatantly a false claim. The RRC is the amount claimed on line 70 of the 1040 and can be verified on the IRS website www.irs.gov . As of 12 pm PST on Saturday, January 24, SBBT will NOT approve RALs associated with tax returns claiming this credit.

Based on what the IRS has communicated today, if a taxpayer claims ZERO on line 70, and is entitled to an RRC, the IRS will calculate and credit the taxpayer with the correct RRC and adjust the refund or balance due accordingly. But if they claim the WRONG AMOUNT, then their REFUND WILL DEFINITELY BE DELAYED.

Assuming what the IRS says is true, SBBT will not deny a RAL application if line 70 on the associated tax return is ZERO filled or blank and the RAL application passes all other criteria. If there is any change to this procedure based on additional communication from the IRS, we will notify you.

This e-mail led me to believe that leaving the line blank would allow the IRS to calculate the credit, with no delay. Inserting an incorrect amount would cause a delay. So in essence, leaving it blank seemed to be the safest course of action.