IRS's Tax Rebate Boondoggle | AccountingWEB

IRS's Tax Rebate Boondoggle

Everyone has had the experience of rushing too fast to get something done, only to find your quick actions resulted in a colossal mistake. The IRS knows just how this feels.

This past Monday the IRS mailed over 100 million letters to taxpayers explaining the tax rebate program and describing the exact amount each taxpayer should expect to receive in the rebate check. The only problem is, someone forgot to proofread the letters before they were mailed.

Over 500,000 letters were sent out on Monday containing incorrect information about the amount of rebates taxpayers can expect. The IRS blames the problem on a computer program that neglected to consider tax credits claimed by taxpayers on prior year tax returns.

The tax rebates are limited to the lower of the maximum rebate amount or the amount shown as total tax on the taxpayer's 2000 tax return. Maximum rebate amounts are $300 for single taxpayers, $500 for head of household, and $600 for married filing jointly. If you claimed tax credits on your 2000 tax return, such as child tax credit or education credits, and those credits reduced your total tax to an amount less than the rebate amount, you will only receive as a rebate the amount of your total tax from 2000.

The IRS computer program failed to take into account these credits when it caused explanatory rebate letters to be printed to taxpayers. The actual rebate checks these taxpayers will receive will be calculated correctly, but the information in the letters is wrong.

To correct the problem with the letters, the IRS is mailing out another 500,000-plus letters to the people who received the erroneous letters.

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