DCL-08-09, IRS Economic Stimulus Payments

DEAR COLLEAGUE LETTER

DCL-08-09

DATE: March 17, 2008

TO: ALL STATE AND TRIBAL IV-D DIRECTORS

RE: IRS Economic Stimulus Payments

Dear Colleague:

The Department of Treasury will begin sending economic stimulus payments to more than 130 million recipients in early May. After meeting with Financial Management Service (FMS) earlier this month, Treasury has confirmed the following information regarding the stimulus payment process, including how injured spouse claims will be handled on joint returns.

IRS is mailing two notices regarding the economic stimulus payments. They will begin mailing the first notice, “Economic Stimulus Payment Notice,” in early March. It will inform the recipient of the stimulus payments and when payments will begin. A copy of the notice is available at http://www.irs.gov/pub/irs-utl/economic_stimulus_payment_notice.pdf (adobe required).
The second notice will go out shortly after the first. It will advise how much the recipient should expect to receive and when the payment should arrive.
The timeframe for issuing stimulus payments will be May – September 2008. OCSE expects to begin receiving offsets from the stimulus payments as early as mid-May.
Stimulus payments will be treated like any other tax offset refund. All or part of a non-custodial parent’s (NCP) payment can be used to pay past-due Federal (IRS) or non-tax federal debts such as student loans or child support. If this happens, the NCP will receive the same Treasury offset notice as a regular offset.
Taxpayers must file a 2007 tax return, have a valid Social Security Number and have at least $3,000 income to be eligible for a stimulus payment.

Joint Return – Injured Spouse

Injured Spouse Claims (Form 8379) will be calculated at up to 50 percent of the eligible amount of the stimulus payment prior to offset, regardless of the percentage of income claimed by the unobligated spouse for tax year 2007.
The unobligated spouse will not be required to file an additional Form 8379 to receive their portion from the stimulus payment if they already filed an injured spouse claim against money offset from tax year 2007. IRS will automatically calculate up to 50 percent of the eligible amount of the stimulus payment prior to offset.

Following are three examples of how this calculation would be applied.

Example 1 - Jane and John Doe are eligible for a $1,200 stimulus payment. John is offset for child support for the full amount of the stimulus payment ($1,200). Jane files an injured spouse claim against the stimulus payment offset. IRS would reverse or adjust $600 (50%) from the $1,200 offset for payment since this is the maximum portion to which Jane is entitled as the injured spouse.

Example 2 - Jane and John Doe are eligible for a $1,200 stimulus payment. John is offset for $800, paying off his remaining past-due child support. IRS sends Jane and John Doe a check for $400 for the remaining amount owed from the stimulus payment. Jane files an injured spouse claim against the stimulus payment. IRS would only reverse $200 from the offset amount of $800 as this, along with the $400 already disbursed by the IRS, would be equal to 50% ($600) of the original amount of the stimulus payment prior to offset.

Example 3 - Jane and John Doe are eligible for a $1,200 stimulus payment. John is offset for $400, paying off his remaining past-due child support. IRS sends Jane and John Doe a check for $800 for the remaining amount owed from the stimulus payment. Jane files an injured spouse claim against the stimulus payment offset. IRS would not reverse any portion of the offset as the couple had already received more than 50% ($600) of the original amount of the stimulus payment prior to offset.

The IRS continues to post updates and provide related links on their website http://www.irs.gov. They recently posted informative answers to frequently asked questions about the economic stimulus payments, ranging from basic eligibility to when and how payments will be issued. Some details are still not yet available, such as what the specific distribution schedule will be for issuing payments.

While it is difficult to predict the amount of additional collections OCSE expects to receive from the stimulus payments, early projections indicate that these offsets could generate in excess of $750 million in collections. We will continue to provide updates via DCL and/or E-Flash, and during scheduled Federal Offset state teleconferences.

If you have any questions regarding the updates provided above, please contact Scott Hale at (202) 401-5745 or scott.hale@acf.hhs.gov.

Sincerely,

Margot Bean
Commissioner
Office of Child Support Enforcement