IRS Reports Confusion Over Rate Reduction Credit

by Mike Godfrey, Tax-News.com, Washington

25 February 2002

The US Internal Revenue Service has revealed that confusion over the Rate Reduction Credit has resulted in filing errors which may result in a delay of refunds.

The new addition to the tax return form is applicable only to US citizens who were entitled to the 2001 tax rebate, but did not receive it last summer. However, confusion over what to put in this section has so far flummoxed over 1 million taxpayers, according to reports.

In a news release, the IRS revealed that the most common errors were taxpayers who had already received the rebate filling in the amount that they received, and taxpayers who were claimed as dependants on someone else's tax return claiming the amount.

The US tax authority is advising taxpayers who realise that they have filed incorrectly for the Rate Reduction Credit not to file an amended return, as IRS staff have now been alerted to the potential confusion over this new provision, and are re-examining all tax returns for errors.

However, electronically filed tax returns with errors of this kind are being rejected, so the IRS is advising taxpayers who have filed online to check with the service which handled their tax return, and to re-file a corrected return if necessary.

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