Rules Issued for Rebate Checks for Individuals with No Tax Liability

The IRS has issued rules for individuals to follow to claim their rebate checks under the Economic Stimulus Act of 2008, P.L. 110-185, if they do not owe taxes for 2007 (Notice 2008-28). Generally, taxpayers will receive checks in the amount of their 2007 tax liability or $600 ($1,200 for married couples), whichever is smaller. However, the Service has said that even individuals with no tax liability can receive the checks if they have at least $3,000 of qualifying income.

Qualifying income for these purposes includes Social Security benefits and monthly retirement, survivor, and disability benefits, as well as earned income. However, according to the IRS, supplemental security income payments do not count as qualifying income.

Individuals with no income tax liability should file Form 1040A, U.S. Individual Income Tax Return, in order to receive the rebate. Individuals with no income tax liability will receive a $300 rebate ($600 for married couples). When filing Form 1040A for these purposes, individuals should write “Stimulus Payment” in the blank space at the top of page 1. They should then complete the return, even though they owe no tax, and sign and date it under penalty of perjury.

In order to electronically file such a return, an individual with no income will be forced to enter $1 of adjusted gross income. The IRS has announced that it will not challenge the accuracy of such returns if they are filed for purposes of claiming the rebate (Rev. Proc. 2008-21).