Update: efile Solution for Stimulus Payment Returns

A little more than a week ago I wrote about how the IRS was unable to accept electronic files for returns created solely for the purpose of applying for the stimulus payment.  The problem is two-fold: our return software, TaxWise, does not generate an efile for $0 AGI returns, nor does the IRS currently accept efile returns when AGI is $0 (as mentioned here).

In my previous entry I referred to a temporary solution to the efile problem and I’m happy to report that the IRS has officially sanctioned the use of this solution.  I received confirmation of the IRS’ position in a message from Bonnie Speedy, the National Director for AARP Tax-Aide.

From this point forward, Tax-Aide volunteers may prepare a return with $1 listed in box 8a as taxable interest.  This $1 of unearned income will show up as the AGI for the taxpayer, thus enabling TaxWise to generate an efile for the return and permitting transmission to the IRS.

I’d like to publicly thank all those at AARP Tax-Aide for leading the discussion with the IRS in an effort to reach a viable solution.  I can only imagine the steps required in order for the IRS to officially adopt this policy, including the approval of a new Revenue Procedure.

Nevertheless, there still is no official word regarding the availability of efiling for $0 AGI returns.  I’ve been told that the best working estimate for a solution is April 1st.

Finally, there still is one additional issue with this solution.  TaxWise currently does not accept direct deposit account information for a tax return where there is no refund due to the taxpayer.  Therefore, a taxpayer electronically filing a $1 AGI return should expect to receive a stimulus check in the mail.  The IRS has contacted the developers at TaxWise to change this characteristic of the program which will allow stimulus payments to be deposited directly to accounts listed on the $1 AGI return.  I don’t know how many other return preparation programs out there behave this way, but I get the feeling that TaxWise is not in the minority.