New Tax Law Allows for Advance Tax Payment Checks

Most taxpayers will get an advance of a 2001 tax credit.

Church Finance Today

New Tax Law Allows for Advance Tax Payment Checks

Most taxpayers will get an advance of a 2001 tax credit.

The IRS begins sending out advance payment checks this summer under a new tax law passed by Congress and signed by President Bush earlier this year. This article will give church treasurers a summary of the new law.


The Economic Growth and Tax Relief Reconciliation Act of 2001 approved by Congress and signed by President Bush directs the Treasury to send checks to most income taxpayers this year, giving them an advance payment of a 2001 tax credit. This is a reduction of tax and is not taxable income on the federal tax return. The IRS will automatically process these advance payments. Taxpayers will not have to complete applications, file any extra forms, or call the IRS to request their payments.

In general, individuals who had a federal income tax liability for 2000 and who could not be claimed as a dependent on someone else’s tax return are eligible for a 2001 advance payment this year. You had a liability if your tax was greater than the amount of your nonrefundable credits, such as the child tax credit, education credits or child care credit. Refundable credits, such as the earned income tax credit, are not a factor in determining eligibility or computing the credit or the advance payment. Those who did not have an income tax liability will not receive an advance payment. However, persons who did not have an income tax liability for 2000 but who have one for 2001 will be able to claim the tax credit on their 2001 return, provided they are otherwise eligible. Taxpayers whose advance payment is less than the credit amount figured on their 2001 tax return will be able to claim the rest of the credit when they file their 2001 return. Taxpayers whose advance payment is larger than the credit amount figured on the 2001 tax return will not have to pay back any difference.

Advance payment amount

The 2001 advance payment amount is five percent of the “taxable income” shown on a taxpayer’s 2000 tax return (less any credits), up to a maximum of $300 for a single taxpayer and $600 for a married couple filing a joint return. Taxable income is reported on line 51 of Form 1040, line 33 of Form 1040A, and line 10 of Form 1040EZ. Most taxpayers will get the full amount as an advance payment this year; some will have it split between this year and next; and some may get all of it as a credit on the 2001 tax return.

If a taxpayer’s advance payment is less than the maximum dollar amount for his or her filing status, that person may be able to claim a credit on the 2001 return, up to the difference between the allowable amount and the payment already received.

Key point. The advance payment will be reduced because of any outstanding government debt, such as back taxes, or a student loan, or because of past-due child support obligations. In such a case, the IRS will send the person an explanation of the offset. If the advance payment amount is larger than the debt, the taxpayer will get a check for the difference. If the full advance payment is applied to the debt, the taxpayer will not receive any check.

When will checks be received?

It will take the IRS about three months to mail checks to those who have already filed their 2000 federal tax returns. By mid-July, the IRS was to have sent taxpayers a letter describing the amount of the advance payment check, the week it will be sent, and the possibility of an offset for an outstanding debt. Recipients should keep the letter for reference when completing their 2001 returns. The IRS will also send a letter of explanation to taxpayers who are not eligible for the payment.

Generally, the last two digits of taxpayers’ social security numbers will determine when the checks are mailed, so a person may get a check at a different time than a neighbor or even other family members. For example, taxpayers with social security numbers ending in 00 to 09 will be the first to receive their checks, which should arrive the week of July 23. Taxpayers with social security numbers ending in 90 to 99 will be the last to receive their checks, which should arrive the week of September 24. For married taxpayers who filed a joint return, the first social security number on the return will determine the mailing date for the advance payment check.

Because any bank account information provided by the taxpayer when filing the tax return may no longer be applicable, the IRS will not send the advance payments by direct deposit. Nor will taxpayers be able to request direct deposit of these payments.

Key point. Taxpayers who have moved should file a change of address form with the U.S. Postal Service to ensure their check goes to the correct address. Taxpayers may also notify the IRS directly by filing Form 8822, “Change of Address.” Church treasurers should consider inserting a notice in a church bulletin or newsletter reminding persons who have moved to file Form 8822 in order to avoid any delay in receiving their check from the IRS.

This content originally appeared in Church Treasurer Alert, August 2001.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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