To Ray in Ohio, mennonite question

[Marie]

Today, a mennonite client called and had received $1800 for recovery rebate credit. I had failed to put this on his 08 tax return. He said he had not received anything last year, which was correct, I checked. Why wouldn't he have got somehting for his two kids? I didn't do his return last year, but he's a farmer and had gross income. He asked if this was a government hand out and was wondering about keeping it. I feel it was a payment based on income tax, not SE or social security. What do you think?

[kcjenkins]

It is, at least in theory, a tax rebate, not welfare and not releated to SE tax. I'd urge him to keep it, or at worst, to donate it to his church, rather than return it to the dunces in DC. Just my 2¢

[Marie]

It is, at least in theory, a tax rebate, not welfare and not releated to SE tax. I'd urge him to keep it, or at worst, to donate it to his church, rather than return it to the dunces in DC. Just my 2¢

I told him to stimulate the economy with it and he said he bought a tractor already this year. (not with the stimulus, didn't know he was getting it, but helps with the payments, anyway). I'm pretty sure most of his people who received the check last summer spent their money. I didn't hear from them, anyway.

I would still like to talk to Ray in Ohio, if he's out there.

[Ray in Ohio]

I'm still here. Totally charged and refreshed for what will be one hectic week.

To try to answer your questions:

I found out too late last year, that SE income that is not subject to SE tax, (which I am assuming your client's wasnt) is not qualifying income for the RRC. However, if the taxpayer has Income tax prior to the CTC, then they do qualify for that portion plus the 300 for each child. The only reason that I can think of that he is getting it now, is that on the 07 return he had no tax, but now on the 08 he does and therefore qualifies.

Now... "is this a government handout?" I get asked that question a lot. I try to explain it like KC did above. It's a "Rebate" of something paid prior. I also have told some if you do not want to keep it, to donate it to a church or charity that will put it to better use than the buffoons in the DC.

I had a few TP that wrote VOID on the check and sent it back. None of them got any response. I am curious where those checks actually are. Where did they mail it?? Was the center that received them a "receiving" center??? Are the checks still floating around out there somewhere??

[Marie]

No one told me they sent it back. I guess that is their option. I am still dealing with that other preparer giving the add'l child tax crd. He has now amended back 3 years to get this for some of these clients. Most have quite a few children which amounts to a substantial refund. Now thru the mennonite community talk, several have called me and want to know if it is right and/or what they should do. I know they shouldn't receive ACTC, and have told them that I have worked the worksheet and it says do not use exempt SE income. In your experience, does IRS catch this eventually? Should we just write VOID on the check and send it back? Or send in another amended return and pay back. But wouldn't that generate interest and penalty. Can they hold their tax pro accountable for this? I'd like to have these clients next year, so I'm trying to help, but during the last week of the season isn't the best time.