The Tax Attic — May 21, 2009

Jerry Coon, Enrolled Agent

Jerry Coon, Enrolled Agent

Two provisions of ARRA take immediate affec

I attended a tax conference last Thursday and Friday in Grand Rapids. One of the instructors was Marilyn Meredith, an Enrolled Agent from Port Huron. I have known Marilyn since I started in the tax business 30 years ago. Marilyn is one of those rare really smart tax people who also have the ability to teach. I know many really smart tax people, but most of them don’t function well in front of crowds.

Two-day tax conferences seem to be especially hard on the instructors for a couple of reasons. According to the National Association of Tax Professionals, the average age of all tax professionals in Michigan is 57 years of age. That means the average tax professional in Michigan is very experienced. It’s a veteran crowd that prepares lots of returns. They aren’t looking for an instructor to go over the basics of tax law. They want some meat on the bone, so to speak, and they tend to ask tough questions. Two days in the same place gives them a chance to come up with lots of tough questions.

Rookie instructors tend to get flustered and over-whelmed. Instructors like Marilyn have well-written material, have the knowledge to back up the material, and tend to roll with the questions. If they don’t know the answer right off, they either get some help to research the question immediately or tell the person to talk to them later. It’s quite a highly prized skill. I think it’s kind of like being able to hit a curve ball. Either you can or you can’t and, even though practice might allow you to hit a poor or regular curve ball, no amount of practice will get you hitting a good curve ball. You just have to have the natural talent of hitting a curve ball.

Marilyn is one of those natural curve-ball hitters, and the seminar attendees love and appreciate her work. One of the tough subjects she covered was evaluating how the American Recovery and Reinvestment Act of 2009 (ARRA) is going to affect many of our clients right now. She pointed out that two provisions in particular are going to be of immediate effect. First, a one-time $250 payment will be made to adult taxpayers who are currently receiving Social Security (SSI) benefits, adult taxpayers currently receiving Railroad Retirement benefits, adult taxpayers currently receiving Veterans Disability benefits from the Veterans Administration, and taxpayers of any age currently receiving SSI benefits, except those receiving SSI while in a Medicaid institution will specifically not qualify for a benefit.

The definition of “currently receiving” is limited to individuals who were eligible to receive benefits during any of the three months prior to the signing of ARRA on February 17, 2009. It’s important to note that only adult taxpayers will qualify as “currently receiving” benefits.

The definition of “adult taxpayer” excludes children under the age of 18 or age 19 if still in high school.

Each eligible taxpayer will only receive one $250 payment. A husband and wife both receiving eligible benefits will each receive a $250 payment. There will be no doubling up for taxpayers, however, who are receiving both Social Security and veterans benefits, for example, or Social Security and Railroad Retirement.

A letter will be sent out to eligible taxpayers from Michael J. Astrue, Commissioner of the Social Security Administration, explaining the program. In that letter, Commissioner Astrue points out more than once that eligible taxpayers do not have to do anything to get the $250 payment. Eligible taxpayers will receive the $250 without taking any action. If current benefits are being received by direct deposit, the $250 will be sent via direct deposit.

In bold print, he reminds taxpayers to not provide personal information to anyone saying they are from the Social Security Administration and wanting to process the $250 payment for you-THAT IS A SCAM. With the exception of the letter, Commissioner Astrue or anyone else from the Social Security Administration, the Railroad Retirement Board or the Veterans Administration will not be contacting anyone about the payment. However, if a payment is not received by June 5, 2009, it would pay to contact the Social Security Administration at 1-800-772-1213. The letter directs taxpayers to the website of www.socialsecurity.gov, but sometimes a telephone call is quicker.

Finally, the $250 is not taxable. The $250 is subject to the offset program, so if back taxes are due, the payment will be redirected to pay those back taxes. For taxpayers who are working and receiving benefits, the $250 will reduce the Making Work Pay credit of $400 or $800. Now that’s a confusing issue and the second issue Marilyn so expertly covered last week. I will delve into that explanation in a future article. This is Jerry Coon signing off.

 

Jerry Coon is an Enrolled Agent. He owns

Action Tax Service on Northland Drive in Rockford.

His e-mail address is jcoon@actiontaxservice.com.

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