2001 Tax Rebate is Confusing and Expensive

Congress recently approved $116 million in supplemental funding for the postage, paper, and other costs related to mailing the IRS notices and tax rebate checks authorized by the 2001 tax law.

The IRS began mailing the first of 91 million rebate checks on July 20, 2001, and they will continue the process through September. It's estimated that as many as 17 million taxpayers will be receiving less than the full rebate amount, and approximately 34 million taxpayers won't be getting refund checks at all. (The rebate is an advance refund for 2001, but eligibility to receive a rebate check is based on your 2000 tax return information.)

On the other hand, analysts estimate that somewhere between 950,000 and five million people will receive undeserved rebate checks. For example, they paid tax in 2000, but won't have to file a return in 2001. These taxpayers won't have to return the checks. That could cost the government between $285 million and $1.5 billion dollars.

Over 500,000 taxpayers received an IRS notice saying they'd be getting a larger rebate than they are actually entitled to receive. The IRS sent out corrected notices on July 23. But in some cases, taxpayers received their rebate checks before they received the corrected notice.

Due to another computer glitch, approximately seven million taxpayers could experience up to a ten-week delay in receiving notices and rebate checks. These taxpayers were left out of the initial computer database used to compile rebate information.

Finally, the IRS recently alerted the public to a new tax scam. Taxpayers in several states have received postcards resembling IRS notices. An organization is charging up to $17.95 to tell taxpayers how large their tax rebate will be. The IRS provides this information for free.

Since the amount of the rebate you receive will be deducted from the refund you receive in April, 2002 when you file your 2001 tax return (or added to the amount you owe), it is important that you keep the IRS letter and let us know how much of a rebate you receive so that we can properly prepare your 2001 tax return.

Related Information:
        Ideas and Information About Taxes
        Selecting a Tax Advisor
        Tax Services

© Copyright 2001 Raymond S. Kulzick. All rights reserved. 010805.