IRS Requires Tax Filings for Rebates

The Internal Revenue Service wants senior citizens, disabled veterans and retired railroad workers to make sure to file a tax return in order to receive a rebate, even if they don't normally do so.

That could be problematic, especially if they're not in the habit of filing tax returns because their incomes are too low. Last year, the Treasury Inspector General for Tax Administration issued a report that found about 8 million people unnecessarily filed tax returns. Now many of them will need to file in order to receive a tax rebate, also known as an economic stimulus payment, of $300 for individuals or $600 for joint filers.

The IRS is trying to get the word out about the new requirement, which also requires that the person has earned at least $3,000 over the course of the year. But it can't directly call people on the phone and is relying on organizations like AARP and the news media, as well as word of mouth, to spread the word.

This may not be the most effective route, though, and there are bound to be thousands of retirees, senior citizens, disabled vets and low-income workers who don't find out about the requirement.

What's more, they will need to file by April 15 or risk having their stimulus payment delayed. At the same time, these groups are among those who could most benefit from a stimulus payment and probably would be most likely to spend the money quickly so it could end up cycling through the economy relatively fast.

Some low-income taxpayers are also worried about filing a tax return after years of not filing one and worrying about any legal risk they might be exposed to if the information on the return is not 100 percent correct. Many low-income people have alternative sources of income that may not have been reported over the years. The fear is that the IRS will be watching for any sources of income that might be reported on the 2007 return that never were reported earlier. The $3,000 limit may even encourage such disclosures. It would be a shame, though, if the IRS made the prospect of stimulus payments a way to expose low-income people to tax audits.

It's difficult to think of a good solution to this quandary. The IRS Web site shows a special version of the 1040A that highlights the specific parts of the return that need to be filled out in order to qualify for the stimulus payment, and those parts are fairly limited in scope. The IRS is requiring taxpayers to write "Stimulus Payment" across the top of the return if it's only being filed for the sake of getting a payment. And, confusingly, it wants railroad benefits and veterans' benefits to be reported on a line that only mentions Social Security. As with any tax return, though, honest reporting is always paramount, and any discrepancies could possibly prompt unwelcome attention from the IRS.