The Internal Revenue Service said that economic stimulus payments directly deposited to individual retirement accounts and other tax-favored accounts may be withdrawn tax- and penalty-free.The relief is designed to help taxpayers who may have been unaware that by choosing direct deposit for their entire regular tax refund, they were also choosing to have their stimulus payment directly deposited as well. The tax relief is available for amounts withdrawn from tax-favored accounts that are less than or equal to a taxpayer’s directly deposited stimulus payment.
To qualify for relief, the economic stimulus funds must be withdrawn by April 15, 2009, in most cases. Without this relief, taxes, penalties and other special rules would apply to amounts removed from these types of accounts. Regular tax refunds are not eligible for this relief.
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