Tax News

CCH (cch.taxgroup.com) reports:

The IRS has provided guidance for taxpayers who had their Economic Stimulus payment deposited in a tax-favored account because they indicated on their 2007 federal income tax return that refunds should be directly deposited into those accounts. These taxpayers will be able to make withdrawals from these accounts in an amount equal to, or less than the payment, without regard to the rules and restrictions that normally apply to distributions from tax-favored accounts. Tax-favored accounts include, an IRA, a health savings account (HSA), an Archer MSA, a Coverdell education savings account (CESA) or a qualified tuition program account (QTP or Code Sec. 529 program). If a taxpayer elects to directly deposit his or her refund into more than one account, the taxpayer will receive a paper check. The withdrawal must be made by the time for filing the taxpayer's income tax return for 2008, with extensions. Financial institutions will report the deposit and distribution in the usual manner. Instructions in the Form 1040 package will explain how to report the distribution in manner that shows it is not subject to tax or penalties.
IR-2008-68, 2008FED ¶46,419
Announcement 2008-44, 2008FED ¶46,420
Other References:
Code Sec. 6428
CCH Reference - 2008FED ¶38,869.60
Tax Research Consultant
CCH Reference - TRC INDIV: 59,600