Personal Finance Notebook: Delaying tax filing might affect your rebate check

Q: I'm planning to file an extension for my 2007 taxes. How does that affect my rebate check? Will it be delayed?

– Bob B., Lincoln

A: It could and it's even possible you might lose out altogether. According to the IRS, most of the rebate checks, officially known as "economic stimulus payments," will start going out in early May, after the April 15 tax filing deadline.

Anyone who wants a tax rebate this year must file an IRS return, even if it's someone who normally doesn't earn enough to pay taxes. That's because the federal government is using 2007 tax forms as a basis for the payments.

If you're planning to get a six-month extension, you should be OK to wait until the Oct. 15 deadline to file taxes. Act any later, though, and you run the risk of missing out.

Last week, in a Washington, D.C., conference call with reporters, acting Internal Revenue Service Commissioner Linda Stiff said the IRS will announce a cutoff date later this year for processing stimulus checks.

Those who don't typically pay taxes – low-income residents or those receiving no income other than Social Security, railroad retirement or veterans' disability or death benefits - might figure there's plenty of time to file for a rebate, since they aren't affected by the April and October deadlines.

But IRS spokesman Bill Steiner in Sacramento had one message for them: Don't wait. Since checks will go out in May, the earlier you file the better.

For more answers on federal rebates, visit the IRS Web site at www.irs.gov, which was updated last week with a list of commonly asked questions. Look under "Economic Stimulus Payments Information Center." You can also call the IRS free information line at (800) 829-1040 for individuals, (800) 829-4933 for businesses.

Need help filling out your IRS rebate tax form? Check this Saturday's business section for easy, step-by-step instructions on the 1040A tax form.

More on Medi-Cal

Q: It was very sobering to read your recent article about the woman's family asking about Medi-Cal trying to recover proceeds after her home is sold. I am in a similar situation.

My mother has had Alzheimer's for 11 years. She has no income other than her Social Security. Two years ago she qualified for SSI (Supplemental Security Income) and IHSS (In-Home Supportive Services), which help pay for her 24-hour live-in caregivers. Will the government try to get that financial assistance back if she enters a nursing home or dies?

– Mary M., Elk Grove

A: Don't worry. Those categories of payments – SSI and IHSS – are exempt. Even though Medi-Cal pays for IHSS, it does not seek reimbursement from a recipient's estate after death.

The reason? According to Margaret Hoffeditz, chief of the state's Medi-Cal's Estate Recovery Program, it's counterproductive to pay an IHSS worker (often a family member) to help care for an individual at home and then ask for reimbursement through the estate recovery process.

Also, the state does not have authority to seek repayment of cash payments (like SSI) under federal or state law.

If Medi-Cal has paid for other medical services – such as prescriptions, doctor visits, hospital stays, etc. – the state could seek to recover those costs.

In last week's column, a reader whose 93-year-old mother was living – with dementia – in a nursing home asked whether he could sell her home in order to recoup about $20,000 he'd spent on her previous care and for maintenance of her primary residence, which has been sitting empty for three years.

He worried that Medi-Cal, which is required by federal law to try to recover what it's spent on medical care, would swallow up all the proceeds from the eventual sale of his mother's home, leaving nothing to reimburse his family.

In this case, if his mother's monthly nursing home bill is $3,000 and she was paying $1,000 a month, Medi-Cal has been picking up the remainder. Over the last three years, the mother's share would have been roughly $36,000. Medi-Cal would have paid the balance – about $72,000.

Most of the experts we contacted recommended against selling the home now because it could create tax consequences and might jeopardize the mother's ability to receive Medi-Cal payments for her care.

But there's another alternative that several readers suggested: renting the home.

If the family can get $500 to $750 a month in net rental income (that's minus taxes, insurance, property management and so forth), it can boost the amount that the patient can pay toward her monthly nursing home care. That, in turn, will reduce Medi-Cal's overall share and limit what it would try to recoup.

"This can be a win-win situation," said Mark A. Hyjek, a Fair Oaks attorney who specializes in elder care. "The family can retain ownership of the home until Mom dies, while seeing some appreciation – hopefully – in the home's value."

Hyjek said he's seen cases where "the nursing home resident's income, combined with the net rental proceeds, completely offsets the Medi-Cal reimbursement, meaning there is no claim after death."

And, Hyjek noted, "I'd point out that Medi-Cal paying for Mom's care is, essentially, an interest-free loan from the government. Maybe not that bad of a deal."

About the writer:

• Reach Claudia Buck at (916) 321-1968 or cbuck@sacbee.com. Gilbert Chan contributed to this report.