So, when all the fury was going on around the economic stimulus package I reported on states that taxed the rebate. And although not all states announced officially what they'd do, some did.
Still wondering "Where's my tax rebate?" Well, it seems like in addition to taxing the rebate, some states are going as far as seizing them to satisfy state tax liabilities. See the full article by Tax Girl for specifics, but the gist is that states are protected under the Treasury Offset Program (TOP) and can legally do this. However, they can do this only to refunds and over payments, of which the rebate is neither. Tax Girl raises this issue, which is a good one... but it's doubtful the IRS or state tax departments will stop or return any money due to what seems like semantics.
Hardest hit by the TOP regulation? Residents of New York, Missouri, and Georgia. Sorry guys!
See Don't Mess With Taxes for further coverage on this topic!
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