Help! My Tax Stimulus Rebate Was Direct Deposited Into My IRA! Noooo!

Silly tax payer! You’re not supposed to deposit your tax rebate into your IRA. You’re supposed to spend it on blu-ray players and expensive diet pills and GPS systems! No more maps for you! Sadly, if you asked the IRS to deposit your tax refund into your IRA, they’re going to deposit your rebate there too.

So what do you do? The Tax Cat has taken a break from his vacation to let us know that those of you who were unaware that sending your tax refund to your IRA would send your stimulus check to the same account can withdraw the rebate without incurring any penalties:

To qualify for this relief, funds must be taken out by April 15, 2009, in most cases. Without this relief, taxes, penalties and other special rules would apply to amounts removed from these accounts. Regular refunds are not eligible for this relief.

Eligible tax-favored accounts include traditional and Roth IRAs, health savings accounts (HSAs), Archer MSAs, Coverdell education savings accounts (ESAs) and qualified tuition programs, also known as QTPs or 529 plans. Thus, for example, a taxpayer whose $1,200 stimulus payment is directly deposited into his or her IRA can take out anywhere up to $1,200 from the IRA, tax-free and penalty-free.

In general, the deadline for these withdrawals is the due date or extended due date for filing a 2008 return. This means April 15, 2009, for most taxpayers, or Oct. 15, 2009, for those who obtain tax-filing extensions.

Information on how to claim this relief will be included in your 2008 tax instructions.

Relief for Stimulus Payments Withdrawn from IRAs and Tax-Favored Accounts
Tax Cat [Facebook]


Edit Your Comment

  1. heavylee-again says:

    I e-filed my tax with TurboTax, choosing to have my amounts due electronically removed from my checking account. I was then asked if I wanted my rebate funds deposited in to the same account, yes or no. Obviously, I can’t say for sure that every electronic tax program gave the same choice, but anyone given that choice has no business complaining.

  2. Shevek says:

    I think this just goes to show that the IRS needed a bit more info about the stim payments and Direct Deposit. For example, I’m getting mine in the mail because I didn’t realize that I could fill out the DD info on my 1040 even though I had to pay this year. After the fact, I realized that this information was on their website and I would have found if I’d looked a bit harder, but it would not have taken much to make this more clear.

  3. ByeBye says:

    Big ol Oklahoma’s DHS Child Support Enforcement got it’s dirty hands on it…so, I don’t get the choice of doing anything with it.

  4. Concerned_Citizen says:

    Not sure why you call it complaining. They are allowed to remove it without problems. So no harm, no foul.

  5. unravel says:

    If I had access to “our” rebate, I would so totally pour it in to hiring domestic ninjas to kidnap (catnap?!) Tax Cat, or at least buying a wee look alike, and all kinds of kitty goodies. Like booze.

  6. Turcicus says:

    @Shevek: Damn, I didn’t know that either. Looks like I’ll be getting a check as well.

  7. johnva says:

    @TheManator: umm, doesn’t that mean you didn’t pay your child support?

  8. m4ximusprim3 says:


    *tax cat flails on floor, even though his glasses are still on his face*

  9. m4ximusprim3 says:

    oh, drunken tax cat. What entertainment you provided my brain.

  10. camman68 says:

    @johnva: Not Necessarily! In my case, it means that all of my payments weren’t properly credited to my account when they switched from receiving payments at the “Clerk of Court’s” office to the Child Support Recovery office.

    They don’t have to prove they are correct. I have to prove they are incorrect – and it is two states away from me.

  11. Thorkel says:

    Dear Manator:

    Serves you right for forcing children against their will to live in that sh****le Oklahoma.

  12. johnva says:

    @camman68: Wow, I didn’t even know they went through a government office. I know my dad always just sent my mom a check (and he always paid his).

  13. jermjerm says:

    Not everyone has maps… such as the US Americans and…such as…the iraq

  14. MissPeacock says:

    The state of Alabama is trying to tax our rebates. :(

  15. friendlynerd says:

    Calling yourself out as a deadbeat parent with garnished wages is not the best way to get sympathy.

  16. nequam says:

    @heavylee-again: That’s a different issue, because the people affected by this post chose an account in which to deposit their normal refund and now are stuck having the stimulus refund going into the same account.

    Besides, if you are like me and filed your taxes before the stim. plan was announced, there was no option on TurboTax regarding the deposit.

  17. Buran says:

    @friendlynerd: As we all know around here, people can and do get harassed to pay debts that are either not theirs or are already paid.

  18. Dobernala says:

    Tax Dog ate my stimulus check. What do I do?

  19. BigElectricCat says:

    @MissPeacock: Clearly, you should leave. I did, 20 years ago, and haven’t lost a night’s sleep over it.

  20. WisconsinDadof2 says:

    @johnva: In many states as soon as you are reported to the state as delinquent (properly, or by mistake) by the municipality they can and do intercept state and federal tax refunds to fulfill your obligations.

  21. XTC46 says:

    @johnva: it goes through the state here in hawaii and they do a really poor job. I remember they used to auto deduct from my dads paycheck, then not send my mom a check. My dad was always good about child support, he would pay for tons of things for me in addition to child support, just becasue he was a good dad.

    But I recall lots of times where they would call him demanding he pay his child support and accuse him of not paying it and making threats etc, then he showed them his pay checks that had the auto deduction by the agency and they would shut up. Or my mom wouldnt get a check for months and she would call and they would say my dad didnt pay them and again he would show them the stubs that showed an auto deduction.

  22. tande says:

    @WisconsinDadof2: Yep, I remember a guy at work who had his Social stolen. They did all of the normal stuff like getting credit cards but he went through and fixed all of that up.

    Then they started making child support claims in other states. I don’t know if he ever got that cleared up. He was still fighting with it when I left.

  23. DomZ says:

    Why would you deposit it directly into your IRA in the first place? All contributions have to be marked for current or prior year and a direct deposit probably isn’t the smartest way to attempt a contribution. Put it in a checking and go from there.

  24. Admiral_John says:

    I filed my returns electronically in February, opting to have the fees deducted from my refund. This caused my refund to be routed to a bank who withheld the fee and deposited the money into my checking account. Because of this, I found out, my rebate check will be mailed to me in June and not direct deposited. I spoke to the IRS and they said there was nothing they could do about it.

  25. BuddyGuyMontag says:

    …why would your stimulus check going into your Roth be an issue? It’s your contribution, you can take it out w/o penalty anyway.

  26. ivanthemute says:

    @wchamilton: I did the same thing (through TurboTax.) Does this mean I’m going to get my oney in June by check, as opposed to Friday the 9th? Did they say why?

  27. unravel says:

    From what I understand, it’s because the deposits to people who opted to have fees taken from their refunds… weren’t actually direct. Those refunds were routed to Santa Monica Bank & Trust – who then passed it on to you, minus the fees owed. I’m assuming that rather than your banking info, the returns contain that bank’s info, and it’s just easier/faster to cut checks than it is to confirm banking info. Same for people who got refund anticipation loans.

  28. ivanthemute says:

    @unravel: Ok, that makes sense. Thanks, I hadn’t thought of that.

  29. ByeBye says:

    @friendlynerd: @Thorkel: @johnva: wow . Alot of HURTFUL posts.

    First off.

    I’ve supported my SON and my EX for the past four years. This is money going to DHS. AS IN, my ex took TANF (look it up) for school, then decided to drop out 6 months later, so of course -I- have to pay it back. If you’re going to be Steves about it, and want to make assumptions, then go ahead. I pay $384 a month to my ex, EVERY month for the past four years (he is only 4), and I owe approx $2200 to Oklahoma Depatment of Heath and Human Services. Being insensitive about it does make you good friends.