Stimulus Refund less S/E tax?

[Chrisbry]

A friend of mine got their stimulus payment LESS about $60 for S/E tax. I hadn't heard of anything like that and asked her if she was sure. She said they got a notice a few days after the direct deposit. Of course, she was also bitching about not getting "their money" for the kids (Uh....they are 19 and 24...duh). She's not my client so I have no idea what their tax situation was. But has anyone heard of such a thing so far?

[JohnH]

Whatever the reduction was, it was not for SE tax on the stimulus payment.

She probably had an outstanding tax liability from a prior year (maybe it was for unpaid SE tax plus some P&I) that the computer picked up when it processed the stimulus payment.

[Pacun]

Maybe her tax liability for 2007 was = StimulusRefund-60.

[Chrisbry]

Outstanding liability -- not a chance -- not this person. She even pays her balance due in February and her estimates are all paid for the whole year by April 15.

She said the notice said something like this: Since one of you is self-employed, $xx has been deducted for self-employment taxes.

I'm thinking she misunderstood something. I haven't had any of my Sch C filers call me yet that their rebate was reduced. I told her she had to be mistaken because it was based on INCOME tax not S/E Tax. She said oh no. Another one of those that thinks they know the tax system. I just didn't argue any more with her because she was basically screaming at me.

I'm glad she is just a friend and not my client. Pity her tax preparer.

[JohnH]

I don't mind looking at notices for non-clients, since it's usually easier to glance at the notice & explain the facts rather than engage in endless speculation with them.

Regardless of what she says about how & when she pays, I'll guarantee that this is related to an outstanding liability of some sort. So if this were my friend I'd tell her I'll be glad to take a look at the notice & explain it to her - otherwise we don't have anything else to talk about on the matter.

[jainen]

>>A friend of mine got their stimulus payment LESS about $60 for S/E tax.<<

If she expected the maximum rebate based on total tax (line 63) of $1200, she would be disappointed to learn that SE tax (line 58) is not included in the rebate amount (line 57 plus line 52). Those numbers suggest she is the kind of taxpayer who tries to optimize EIC benefits using Schedule C.

[Chrisbry]

>>A friend of mine got their stimulus payment LESS about $60 for S/E tax.<<

If she expected the maximum rebate based on total tax of $1200, she would be disappointed to learn that SE tax is not included in the rebate amount. Those numbers suggest she is the kind of taxpayer who tries to optimize EIC benefits using Schedule C.

I wondered if possibly it was because they had tuition credit on both kids and it reduced their tax liability to $1140. I'm sure they don't qualify for EIC. I'm so glad I told all my clients not to count on any rebate amount until it was in their hands. I've only had one phone call.

[Lion EA]

Since she's the expert and won't ask your advice, ask her to please copy you on her letter so you can be better prepared and be learning the issues so you can help your own clients. Maybe, she'll lend you her expertise, or at least her letter. You might ask for pages 1 & 2 of her tax return and Schedule SE, too.

[jainen]

>>I'm sure they don't qualify for EIC<<

I can't say about that, but the numbers fit. Her exemptions/deductions are at least $24000, about $8000 less than the EIC cap. 15% tax on $8000 is $1200, the maximum rebate amount that IRS challenged. Throw a 1099-MISC into the mix and you have some opportunity for creative math. Fill out FAFSA with the tax return in February and you have some motivation.