Rebates for seniors: The next steps

Low-income seniors, many of whom ordinarily don't have to file with the IRS, will need to file tax returns to claim their checks.

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By Jeanne Sahadi, senior writer

NEW YORK ( -- The decision to add 20 million seniors to the ranks of Americans who'll get rebates as part of the economic stimulus plan was in the end an easy one to make.

Getting the rebates in their hands may not be as simple to do.

According to the Treasury, everyone seeking a rebate under the program, which President Bush signed into law Wednesday, must file a 2007 federal tax return, preferably by April 15, if they want to receive their check as early as May or June. (Rebates: What you need to know.)

That filing requirement could cause complications - and expense - for some 12 million low-income seniors who typically don't file tax returns because they don't have to.

Not withstanding the rebate, a married couple 65 and older would only have to file if their 2007 income exceeded $18,550. Single seniors only have to file if their income exceeds $10,050.

The IRS has said it will make a special effort - working with the Social Security Administration - to reach out to seniors living on Social Security to make sure those who are eligible know what they will need to do.

The IRS outreach will be echoed by the AARP, which is planning a campaign to increase awareness about the rebates among seniors through its publications and Web site as well as on its TV and radio shows, said AARP spokesman Jim Dau.

What form low-income seniors should use

The IRS has clarified what low-income seniors living primarily on Social Security need to do to get their rebates.

Seniors with at least $3,000 in qualifying income (which includes not only wages, but Social Security benefits, certain veterans' benefit payments and railroad retirement benefits), should report these benefits on Line 20a on Form 1040 or Line 14a of Form 1040A.

Beyond that, they only need to fill out their name, address and Social Security number, according to a sample return provided by the IRS. They should also write the words "Stimulus Payment" at the top of the form they file.

If a senior has already filed a return and reported at least $3,000 in qualifying income, they don't need to do anything else to receive their rebate. The IRS will simply process that return and issue a rebate check.

Seniors who have already filed a tax return reporting less than $3,000 in qualifying income may want to file an amended return if, in fact, they received enough total income to qualify for a rebate.

Case in point: A low-income senior with $1,000 in 2007 wages, from which $100 was withheld, has already filed for a refund on that $100. And on his return, he only reported the $1,000 and not, say, another $8,000 in Social Security benefits because they weren't taxable. For the purposes of the rebate, he had $9,000 in qualifying income.

To file an amended return, use Form 1040X. The IRS emphasized that reporting the benefits would not increase a filer's tax liability. It would just establish eligibility for the rebate.

Weighing the cost of filing

Some seniors, of course, have already learned that they don't need to file a return for 2007 based on their income alone.

The rule: If your gross income falls below your standard deduction plus the exemption for you and - if you're married, your spouse - you don't have to file a return.

David Mellem, a tax preparer in Green Bay, Wis., authorized to represent taxpayers before the IRS, says he has a dozen clients who come in every year to see if they need to file. Most don't and he doesn't charge them. So far, he's seen about six of them and will now have to call them back to tell them they will indeed need to file to get the rebate.

But he questions whether it makes financial sense for low-income seniors to use a paid tax preparer just to fill out a return for the rebate. Low-income seniors living on Social Security are most likely to get rebates of $300 for singles and $600 for couples. So even a $50 to $100 fee can eat away a sizeable chunk of that.

If low-income seniors need help filling out their forms, Mellem said, they might be better off going to one of the IRS's free tax preparation services. The IRS's Volunteer Income Tax Assistance Program has locations in community and neighborhood centers, as well as shopping malls, schools and libraries. More information about its locations can be found by calling 1-800-906-9887.

There also is an IRS program called Tax Counseling for the Elderly (1-800-829-1040) and an affiliated AARP counseling program called Tax Aide (1-888-227-7669). To top of page

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