What Affects the Amount of an Economic Stimulus Payments?

This month the Economic Stimulus payments are being mailed or electronically deposited in your account. This post addresses some of the common questions that people have about what can affect their stimulus payment and why it could be reduced.

Generally, if people had $3,000 or more in earned income in 2007, they qualified for the stimulus payment. If you made over $75,000 (for an individual) or $150,000 (for married filing jointly) the amount you receive can be reduced gradually until it is completely eliminated.

So assuming that you qualified, you are now asking "What can affect whether I receive the economic stimulus payment?"

PAST DUE TAXES: If you owe past due taxes, the stimulus payment that you should receive will be reduced by the amount of the tax you owe. If you owe more than the stimulus payment that you are entitled to, the IRS will apply all of the payment to that debt. That is, you may not receive any cash in hand. Your tax debt, however, will be reduced.

OTHER UNPAID DEBTS: If you have unpaid student loans or past due child support obligations, the IRS may apply your stimulus payment to reduce the amount of those debts. If the amount you owe for these debts is larger than the stimulus payment you would receive, you will not recieve the stimulus payment.

If the IRS applies the stimulus payment against past due taxes, student loans or child support, you can expect that the IRS will send you a notice explaining what they have done a couple of weeks after they have done so.

AUDIT: The IRS should only capture your stimulus payment if it is already established that you owe the IRS additional past due taxes. When you are undergoing an audit, the IRS is investigating whether you owe additional tax. No determination as to additional tax owed is made until after an audit is complete (and if the audit is appealed, not until the appeal or related actions are complete). Essentially, the IRS should not intercept your stimulus payment just because you are going through an audit. That is, if you are being audited, you should still receive your stimulus payment.

INCARCERATION: Whether a person is incarcerated and sitting in jail or prison should not affect their stimulus payment. This, of course, depends on whether they were eligible for the stimulus payment in the first place. Recall that in most instances a person had to have earned income (of $3,000 or more) in 2007 to be eligible. If someone was in prison for all of 2007, it is unlikely that they would have initially qualified to receive the stimulus payment. But if an incarcerated person did qualify for an economic stimulus payment, they should receive it either by direct deposit or at their last known address.

Ultimately, the only things that should really affect your receipt of a stimulus payment are (1) whether you qualified in the first place and (2) whether you owe money to the government or certain other past due debts (for example, child support).