How the Tax Rebate Applies to People with Disabilities

Guest Column
By Paul Gada

This column is the first in a series of columns discussing timely tax issues.

With the April 15th tax filing deadline close at hand, people can use all the help they can get to survive another challenging tax season.

Although most dread dealing with another tax season, there is something good to look forward to this year.   As I’m sure you know, the federal government, via the IRS, is issuing one-time economic stimulus payments to more than 130 million households starting in May.

The amount of the stimulus payment is $300 for qualifying single individuals receiving just Social Security or veterans-disability benefits and $600 for married couples. However, the payment amount could be more for a couple where one individual is also working (up to a $1,200 rebate) or where a single person with a disability had earned other income (up to a $600 rebate). Also, anyone getting a rebate may be eligible to get an extra $300 for each of their children under 17.

To get an estimate of what your stimulus payment may be, use the IRS calculator offered on their site.

The stimulus payments are not taxable and will not affect your 2007 or 2008 tax returns in any way. The IRS also assures the public that the stimulus payments will not count toward or negatively impact any income-based government benefits, such as Social Security benefits, food stamps and other similar programs.

To be eligible to receive a stimulus payment, you must meet three simple requirements:

•    Have a valid Social Security number (SSN);
•    Have at least $3,000 in qualifying income; and
•    File a 2007 federal tax return.

The first requirement is fairly straightforward. Only those with a valid SSN are eligible for the one-time stimulus payment. Those with an Individual Taxpayer Identification Number (ITIN) instead of an SSN are not eligible. If married filing jointly, both must have valid SSNs, otherwise neither can receive the payment. 

The second requirement is a bit harder to meet. Fortunately, the definition of qualifying income is broad and includes earned income from a job, net self-employment income, Social Security benefits such as Social Security Disability Income (SSDI) and veterans-disability payments.

However, Supplemental Security Income (SSI) does not count as qualifying income. Dividends, interest and capital gains income also do not count towards qualifying income.

For most taxpayers, the last requirement is no more a burden than usual. If you normally file a federal tax return from year to year, you will not have to do anything else other than file your 2007 individual income tax return to receive a stimulus payment this year. Payments are calculated and sent automatically by the IRS. No extra forms or applications are necessary.

For many people, however, there is a catch to the third requirement. Specifically, individuals that only receive minimal SSDI benefits or otherwise have low incomes, and who may not generally owe taxes, will need to file a 2007 federal tax return in order to receive the one-time stimulus payment.

If you normally don’t have to file a federal tax return and need to for the stimulus payment, the IRS form for you is the 2007 Form 1040A.  The IRS provides a sample pre-filled Form 1040A on its site to illustrate what’s required of those that normally don’t need to file a return. We’ve also posted an informational Tax Resource Center, which links to this and other documents related to the rebate.

If it doesn’t look like you qualify for this year’s government bounty, take heart. If your circumstances change and you become eligible after you file your 2007 federal tax return, you can still file an amended return using IRS Form 1040X to get the stimulus payment. If you are not eligible this year but become eligible next year, the economic stimulus payment can be claimed next year on your 2008 tax return according to the IRS.

Hopefully, this explains the details so that you may receive the economic stimulus payment you qualify for.

Have Questions?

I plan to contribute a guest column each of the next few weeks for the AAPD blog on tax issues impacting individuals with disabilities. I welcome your questions as possible topics to cover in these future columns. You can post comments here, so others can see what has been asked.

Happy tax season!

~Paul Gada is a tax attorney and the Personal Financial Planning Director for Allsup, a national provider of Social Security, health care and financial services for those with disabilities.

Copyright, Allsup Inc., used with permission.

Comments

[Lynn]

I sure could use some information re the earned income credit. Even after reading the rules, I can't figure out what portions of my income would be used to see if I were eligible. I have federal disability (ie, retired from federal job on disability prior to age 65), SSDI and some earned income. What counts towards the income limit for the EITC?

[Virginia Gomez]

Doea a person who will be receiving SSDI have to file a tax return? Even if he/she never worked? My son is the sole survivor of his father( who died in a car accident). His father worked for many years.

[Paul Gada]

Ms. Gomez:

I don't have enough information to answer specifically, but I can provide some general information that hopefully will apply to your situation.

To get the rebate, you must file a 2007 tax return even if you normally wouldn't need to file. The form to file in such cases is IRS Form 1040A. The IRS Web site has a sample 1040A with the minimum information required in such cases (http://www.irs.gov/pub/irs-pdf/k1040a3.pdf). It really shouldn't take long to fill out.

Those who can be claimed as dependents by somebody else on a tax return are not eligible for the rebate themselves.

To get the rebate, Social Security monthly retirement, survivor and disability benefits all count. This is the amount reported to you by the Social Security Administration as “Net Benefits for 2007” in Box 5 of Form SSA-1099.

Hope this information helps.

[Edward Keith]

I only recieve workmens comp. as my sole income. apperently this makes me disqualified for SSI or SSDI although I had both legs amputated from the hips down. But I am only disabled in my wheelchair.. not on paper. So I cannot reciece the tax break NH gives property owners who are "disabled" (Read: recieving SSDI).Last year I went to the AARP for tax help and was told my W/C $10,400 was NOT taxable income and therfore I need not file. and not recieve an EIC either. (Earned income credit), and NOW since I will not be filing my "Non_taxable" income, will I lose out on this $300 deal? I have asked many people and they all referred me to ask someone else believe it or not. I am homebound so I will post this. Thank you, 5 more days.

[Jan H]

My husband and I care for our 26 year old son with a disability who lives at home with us and has no income other than his SSI. We are able to count him as a dependent on our tax return because we provide more than half of his financial support. Even though he is a dependent, I understand from reading the rebate rules that we will not get the extra $300 incentive stimulus payment because he is over the age of 17. I wish those in Washington had given thought to this scenerio because (in essence) caring for a disabled adult child is similar to caring for any child who never grows up. Families like us could sure use the extra help. We certainly have the extra expenses!

[Paul Gada]

Mr. Keith:

I'm afraid that getting nontaxable workers compensation payments alone will not qualify you for the rebate based on your situation in 2007.

If your situation changes this year and for example you do earn at least $3,000 in 2008 income, you may be able to apply for the rebate next year. However, you would still have to file a Form 1040A even if you normally wouldn't file a tax return.

I hope this answers your question.

[Bruce Lynn]

Paul thank you for the help you are offering to AAPD. I have a daughter with Down Syndrome. She is 7 years old, receives Social Security, and we claimed her as a dependent when we filed our taxes earlier this year. We have not been filing a tax return for her because she never owes any taxes. My question is, for the purpose of the economic stimulus payment, do we need to file a tax return for her to get the payment that we would receive for her as our dependent?

[Paul Gada]

Mr. Lynn:

You don't have to file a seperate tax return for your seven year old daughter. She would not qualify for the rebate on her own anyway since you are claiming her as a dependent.
If you filed for youselves and assuming you otherwise qualify for the rebate,parents receive an extra $300 per child under 17. So there should be no loss rebate wise to you
as a family.

[W. Marc]

Does one still use the 1040A form after April 15th or the 1040X (assuming one wouldn't ordinarily file a return)?

[Paul Gada]

Mr. Marc:

You submit a very good question. A Form 1040X amended return requires and assumes that an original return was submitted. You would file a Form 1040A in this case.
It really should take minutes to do and can be done for free online at the IRS site (irs.gov) for low income taxpayers, which you appear to be.

[BILL KELLS]

MY WIFE AND I ARE BOTH ON SOCIAL SECURITY,SO I WOULD ASSUME WE QUALIFY FOR $300.00 EACH REGARDING THE TAX REBATE.

WE HAVE PAID FEDERAL TAXES EXCEEDING $2,500.00 IN OUR 2007 TAX RETURN. THIS WAS FROM THE DEDUCTION FOR TAXES ON MY EMPLOYERS
RETIREMENT INCOME. DO WE NOW QUAIFY FOR THE MAXIMUM $1,200.00 REBATE FILING A JOINT RETURN?

[Paul Gada]

Mr. Kells:

Pension income from employers is not considered eligible income for purposes of the rebate.

[J Wesr]

We too care for an adult (23)child with Down's. He is to old for us to receive the "dependent" rebate yet his only source of income is SSI, so we provide full support for the rest of his needs. We also feel we should of at least qualified for the "dependent" rebate check and that this situation was not addressed by the goverment.