The IRS extended to November 21 its deadline for people to use its online nonfiler portal to qualify for economic impact payments (EIPs), even as the agency challenged prisoners’ right to claim them.
“We took this step to provide more time for those who have not yet received a payment to register to get their money, including those in low-income and underserved communities,” IRS Commissioner Charles Rettig said in a statement October 5.
The IRS previously expected an October 15 closing date for the nonfiler web portal.
Rettig added, “Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons.”
The five-week extension applies only to individuals who haven’t received EIPs and don’t normally don’t file tax returns, the IRS noted. Everyone else’s filing deadline remains October 15.
Inmates’ Lawsuit
The IRS’s announcement doesn’t resolve the case of California inmate Colin Scholl, who filed a 2019 tax return and applied for an EIP that the IRS initially approved, only to be told later he was ineligible as an inmate. Scholl joined other prisoners in a 2020 lawsuit, Scholl v. Mnuchin, in the U.S. District Court for the Northern District of California to oppose what they called the tax agency’s inconsistent distribution of stimulus funds under the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136).
The IRS decision settled one element of the controversy between the agency and the prisoners. The district court October 2 had ordered the IRS to “meet and confer” with parties to the case to discuss whether to extend the October 15 filing deadline for detainees and other individuals to use the IRS’s EIP nonfiler web portal to file simplified returns and claim stimulus payments.
The court noted that the IRS and Free File Inc., which provides the software for the nonfiler portal, acknowledged that an extension to the EIP filing deadline has been discussed.
Neither the IRS nor the Free File Alliance responded to a request for information or comment.
The Empire Strikes Back
While the IRS yielded on its EIP filer deadline, the agency and the Justice Department are moving forward with an appeal of the rest of the Scholl order. In an October 1 filing, the Justice Department, along with U.S. Attorney for the Northern District of California David L. Anderson, contested the district court’s order certifying the incarcerated plaintiffs as a class, arguing that it amounted to an “improper nationwide injunctive relief.”
The emergency motion also argued that incarcerated individuals denied EIPs in 2020 could still collect them after filing their returns in 2021. Christine Speidel, co-counsel in McGruder v. Mnuchin, No. 2:20-cv-03590 (E.D. Pa. 2020) — which among other things challenges the IRS’s use of allegedly “arbitrary and capricious” guidance to distribute EIPs — said the government is still denying prisoners’ rights to the payments.
“The [government’s] appeal will be important to watch for the Ninth Circuit’s approach to both the CARES Act and the broader [Administrative Procedure Act] issues,” Speidel said.
Similar to McGruder, Scholl asks the court to consider whether the IRS’s public instructions on coronavirus emergency legislation meet Administrative Procedure Act standards of notice and comment, public input, and other statutory criteria for binding regulation.
Hurry Up
The California district court also found that the IRS should bear the cost of identifying and notifying jailed individuals so they can file paper tax returns to qualify for EIPs.
The court said Treasury and the IRS are “best suited to bear the costs of the notice” based on their own claims that they have programs and procedures to identify incarcerated individuals.
But the Justice Department’s emergency motion argued that it would be a mistake to expedite payments to prisoners while the issues were pending litigation.
“Once the government issues advance refunds to prisoners, it is unlikely as a practical matter to be able to recover any of that money, should the preliminary injunction not be upheld on appeal,” the emergency motion for stay argued.
The district court refused to order the IRS to extend its October 15 deadline, finding that would be a form of substantive relief beyond the court’s authority.
One thing all sides agreed on was the need for a speedy resolution. The Justice Department’s emergency motion noted the plaintiffs’ request for a shortened briefing schedule and agreed to it.
In Scholl v. Mnuchin, No. 4:20-cv-05309 (N.D. Cal. 2020), the plaintiffs are represented by Lieff Cabraser Heimann & Bernstein LLP and the Equal Justice Society.