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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: govt retiree credit Date: 3/15/2010 4:37 PM
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I did a tax return for a friend who is retired from the federal government and who receives a pension from OPM. He was CSRS, not FERS, and his 30+ years of government service was not covered by social security. He also works as a consultant, and his joint income exceeds $200K.

His return was accepted without question, but his refund came up short $250. He subsequently got a letter from the IRS, saying that they had adjusted his refund, and inviting him to call or write if he had questions.

Well, he did call, and the IRS person he spoke with told him that with AGI > $190K, he didn't qualify for the Govt Retiree credit. Now he has earned income, and I realize that his AGI is too great for him to to receive the Making Work Pay credit, which is phased out at $190K. But I can't find any language, anywhere, to suggest that the Govt Retiree credit is phased out as well.

My friend isn't terribly upset about the $250 - he hardly needs it - but I'm greatly puzzled as to the result. Am I missing something?

Lorenzo
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Author: rosewine Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109597 of 121095
Subject: Re: govt retiree credit Date: 3/15/2010 4:44 PM
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The making work pay credit is reduced by the amount of the Govt Retiree credit (or the Social Security credit) so rather than $400 he would only qualify for $150 and then doesn't qualify for that because of the phase out amount.

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Author: Patzer Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109598 of 121095
Subject: Re: govt retiree credit Date: 3/15/2010 4:45 PM
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. . . the IRS person he spoke with told him that with AGI > $190K, he didn't qualify for the Govt Retiree credit.

I have no idea whether he got told correctly or not, but if he did and you used software, it strikes me he should be in line for collecting on whatever accurate return guarantee the software has.

Patzer

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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109599 of 121095
Subject: Re: govt retiree credit Date: 3/15/2010 4:53 PM
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The making work pay credit is reduced by the amount of the Govt Retiree credit (or the Social Security credit) so rather than $400 he would only qualify for $150 and then doesn't qualify for that because of the phase out amount.

Well, no. Look at Sch M. It's true that if there is a Making Work Pay credit, it's reduced by a $250 Govt Retiree credit. But in this case, there IS no MWP credit, as AGI is too high. That is, Sch M line 9 is zero. Every way you work it, there should be $250 at the bottom of Sch M.

Lorenzo

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109602 of 121095
Subject: Re: govt retiree credit Date: 3/15/2010 5:08 PM
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I did a tax return for a friend who is retired from the federal government and who receives a pension from OPM. He was CSRS, not FERS, and his 30+ years of government service was not covered by social security. He also works as a consultant, and his joint income exceeds $200K.

His return was accepted without question, but his refund came up short $250. He subsequently got a letter from the IRS, saying that they had adjusted his refund, and inviting him to call or write if he had questions.

Well, he did call, and the IRS person he spoke with told him that with AGI > $190K, he didn't qualify for the Govt Retiree credit. Now he has earned income, and I realize that his AGI is too great for him to to receive the Making Work Pay credit, which is phased out at $190K. But I can't find any language, anywhere, to suggest that the Govt Retiree credit is phased out as well.


You are right. The bottom line of Schedule M should be a $250 credit. This was a lobbying triumph for NARFE (according to them) that got $250 payments out to everyone they could think of who wouldn't necessarily qualify for the MWPC.

My primary suspect is line 10 of Schedule M. I assume you answered that he received no $250 payment. I suspect the IRS thinks he did. If the return was e-filed it would bounce if IRS records disagreed with Schedule M. We've seen several cases where people are receiving no SS benefit but got the $250 payment. It seems that if you've ever been inducted into their benefit system there comes a point where you're there for life whether you ever get a penny from them. Every one of these people who we've sent back to their bank records has found the payment.

Call the special number, 1-866-234-2942. You need the taxpayer's SSN, ZIP Code from last filed return, and DOB. The system will tell you whether a $250 payment was made. Follow up as appropriate for the response.

Phil
Rule Your Retirement Home Fool

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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109603 of 121095
Subject: Re: govt retiree credit Date: 3/15/2010 5:31 PM
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If the return was e-filed it would bounce if IRS records disagreed with Schedule M.

Ha! I'm a VITA ERO, and believe me, I have plenty of experience with returns bouncing because of Schedule M, line 10. By my count, we've had about 15 such rejections so far this year, about three/week. But in this case,

The return was efiled, and it did not bounce.

I told the taxpayer that IRS telephone advice is incorrect about half the time, and suggested he call again, because surely he'd get someone else. Well, he did, and this person said that the credit was denied because Schedule M wasn't attached to his return!

Curious. The return was done with the VITA software, TaxWise. I ran diagnostics and looked at the list of schedules/forms to be sent in electronically. Schedule M is most assuredly there. Of course, I have no way of knowing what was actually transmitted in the efile.

So I guess it's time to do an amended return. But the question now is, how to you amend a correct return?

Lorenzo

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109604 of 121095
Subject: Re: govt retiree credit Date: 3/15/2010 5:56 PM
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But the question now is, how to you amend a correct return?

Remember that your starting point is the return as adjusted by IRS. That means that you're starting with a return not showing the credit. You need to send a 1040X with a Schedule M.

Phil
Rule Your Retirement Home Fool

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Author: papaduke101 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109615 of 121095
Subject: Re: govt retiree credit Date: 3/16/2010 11:02 AM
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"Call the special number, 1-866-234-2942. You need the taxpayer's SSN, ZIP Code from last filed return, and DOB. The system will tell you whether a $250 payment was made. Follow up as appropriate for the response."

Thanks for the timely info, Phil.
I called the number above and confirmed that DW and I received the payments. Last week, our tax preparer asked us at our meeting if we had received the payment. We believed we did but we did not have a record of the event.
I just sent our preparer a message confirming our receipt of the checks.
This confimed info may have prevented a future amended return.

Joe

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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109780 of 121095
Subject: Re: govt retiree credit Date: 3/24/2010 9:45 PM
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A final followup to this thread. Recall that I prepared and efiled a return for a friend with earned income, whose AGI is too high for the Making Work Pay credit. But he is a govt retiree, and should get the $250 Govt Retiree credit. I efiled return and it was accepted. When he got his refund, it was $250 short, and he was subsequently advised that the Schedule M credit had been removed. I suggested he call to inquire, and he did.

- First IRS person said he didn't qualify, income too high. That's clearly wrong: there's no income limit on Govt Retiree credit. I suggested he call again, as IRS phone advice is sometimes incorrect.

- Second IRS person said credit was removed because there was no Schedule M with the return. I was a bit skeptical about that, as the software (TaxWise) certainly showed that Schedule M was part of the efile. But never mind, no point in arguing, so I prepared an amended return to be sent in.

- Just for fun, my friend called the IRS a third time about the removal of the credit. And IRS person number three said that shouldn't have happened. Schedule M was part of the return after all, she would fix everything up, and the missing $250 would be sent along shortly. No amendment needed.

I don't know if that's the end of it or not, but it looks promising. It's a bit bothersome that *three* errors were made here: deleting the credit in the first place, the bum advice from IRS lady #1, and the wrong explanation from IRS lady #2.

Lorenzo

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