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ABA Suggests Debit Cards, Less Filing for Stimulus Payments

Posted on Apr. 14, 2020

The IRS should make more coronavirus stimulus payments automatically and should allow taxpayers without bank accounts to receive the payments on no-fee debit cards, according to the American Bar Association Section of Taxation.

In an April 13 comment letter, the ABA tax section commended the IRS’s quick rollout of an online portal through which taxpayers who didn’t file tax returns in 2018 or 2019 can provide the IRS with information to facilitate payment of the economic impact payments (EIPs) established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136).

“However, there are some remaining issues that the portal does not address; specifically, many of these individuals may: (1) not have access to the internet or assistance to claim the EIP; (2) be victimized by unscrupulous tax preparers who charge high fees (diluting the effect of the EIP in offering assistance to this population); and/or (3) have to pay exorbitant fees imposed by check cashing services (also diluting the effect of the EIP),” the letter said.

Direct deposit of the EIP is convenient for taxpayers with bank accounts, but those without will have to resort to paper checks and check-cashing businesses, the ABA tax section stated. That will have three negative effects: It will take longer for those in need to get the money; they will have to risk exposure to the virus to convert the paper checks into cash; and they will have to pay the substantial fees that those check cashers charge.

These downsides could be partially or completely avoided if EIP recipients without bank accounts can receive the funds on cash cards, no-fee debit cards, or existing government benefits cards, according to the tax section.

Let’s Get Automatic

The letter noted that taxpayers receiving veteran or Supplemental Security Income benefits are already supposed to get them electronically. This should provide an existing channel to quickly pass along the EIP payments without the need for a further filing requirement.

While it may be more difficult for the IRS to discern whether these taxpayers have dependents who would increase their EIPs, the imposition of some affirmative act requirement would further delay assistance, according to the letter. Automatic issuance would also allow volunteers to focus their efforts on taxpayers who need help filing tax returns.

“While this is not a perfect system because some SSI and VA beneficiaries might have [qualifying children] and not realize they could get more stimulus assistance by claiming them, we believe it is the most efficient way to deliver an influx of cash to people who might have new expenses resulting from the COVID-19 pandemic,” the letter continued.

Online and Offline

Former National Taxpayer Advocate Nina Olson told Tax Notes April 13 that 41 million U.S. taxpayers don’t have access to broadband internet, and 19 million don’t have internet access at all. She commended the idea of virtual volunteer income tax assistance (VITA), and further suggested that the IRS consider a telephonic filing system for nonfilers seeking their EIPs.

The ABA tax section's letter also highlighted issues for taxpayers with limited or no internet access, noting that many elderly and homeless people don’t have email addresses to provide at the online direct deposit portal. It suggested that the IRS use the U.S. Postal Service address database to find or double check addresses before mailing checks.

VITA practitioners and other volunteers need more information about how to help people get their EIPs, the tax section said. “For example, service providers, legal aid attorneys, and other community volunteers would benefit from clear step-by-step instructions to help eligible individuals claim the EIP when a complicated tax analysis is not involved. Likewise, a clear decision tree on who is eligible for a simple EIP claim, who should file a normal tax return, and who should talk to a more seasoned tax professional or VITA volunteer would be useful in determining how to proceed.”

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