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LITCs Could Help With Stimulus Distribution, Tax Pros Say

Posted on Mar. 30, 2020

If history is any guide, millions of the lowest-income Americans may be overlooked in the distribution of coronavirus relief funds.

“I am concerned that [the stimulus] is leaving out large segments of immigrant communities, as well as low-income communities that haven’t had to file” tax returns, said Rick Kim of the Los Angeles-based Koreatown Youth and Community Center, which also runs a low-income taxpayer clinic and volunteer income tax assistance center there.

Among those who may have trouble accessing tax rebate checks under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136signed into law by President Trump on March 27 are people with individual taxpayer identification numbers rather than Social Security numbers, Amish and other religious communities that don’t claim Social Security, Supplemental Security Income recipients who don’t have a filing requirement, nonmilitary spouses who file jointly, and people with incomes too low for a filing requirement, tax professionals told Tax Notes.

One way to reach the lowest-income Americans may be LITCs, practitioners said.

“LITCs can definitely be a messenger to the low-income taxpayer community we represent,” according to Christine Speidel of Villanova University Charles Widger School of Law's Federal Tax Clinic. Although LITCs are reserved by law for controversy representation with the IRS, Speidel said the LITC Program Office is considering a short-term exception to that requirement for the coronavirus crisis.

Kim said that under current LITC rules, taxpayers won’t be eligible for the program’s representation until they fail to receive a payment from the IRS, thus creating a controversy.

“Those who earn the least, who don’t have filing requirements, who are one or two weeks away from impoverishment need to have avenues to assistance [in order] to endure this for months,” Kim said.

Millions Left Out?

Nina Olson was the national taxpayer advocate the last time the government tried to stimulate the economy with a big fiscal injection. She testified before Congress in June 2008 that the IRS, working with the Social Security Administration and the Department of Veterans Affairs, identified 20.5 million beneficiaries who had no filing requirement for 2006, depriving the IRS of the contact information needed to disburse 2008 stimulus payments.

The IRS mailed informational packages to those 20.5 million beneficiaries in early 2008, instructing them how to file tax returns so they could claim their money, Olson said. By June 14, 2008, only 7.7 million of those individuals had filed returns for 2007, she said.

Congress did provide some fixes in the CARES Act for problems like those that cropped up in 2008, Olson said. The legislation includes an exception for military spouses without SSNs, she said.

But “it’s not clear to me why the IRS needs these folks to file returns,” Olson said. “Is it [a] legal [issue], or is it because the return is the processing mechanism to get the person’s deposit information and get [it] in the system so as to get it over to [the Treasury Department’s Bureau of the Fiscal Service] to make the payment? Somehow the IRS is going to have to get the person’s most current address and banking information.”

“At any rate,” Olson said, “this time around, if the IRS sends out information packages — even if they sent them today — they won’t be received for several weeks, which means these folks will have more of a delay than others to get the payment.”

‘Hit or Miss’

While some LITC directors expressed enthusiasm for their organizations taking a more active role in finding low-income taxpayers, other were more skeptical.

“It’s so hit or miss,” said William Schmidt of the Kansas Legal Services LITC. “It’s going to be difficult to reach everyone.” LITC clients are less likely than middle- and upper-income taxpayers to have the wherewithal for technological workarounds such as videoconferencing, Schmidt said, adding that many rely on mailing addresses rather than email addresses.

Kim said his Koreatown operation not only offers LITC and volunteer income tax assistance services, but also provides meals, transportation, elder care, and nontax services in a community of 150,000. “We’re putting on an immediate-needs response” to the pandemic, under which filing tax returns may not be a priority, he said. “Some of them are not even tax [return] filers,” Lim said, “but all should get the stimulus.”

Schmidt questioned how much in IRS resources should be dedicated to the process. “Even if we weren’t dealing with the coronavirus, is it a practical use of time to go one by one down a list?” he asked.

But Speidel said more IRS leadership is needed. “The IRS can do better by working with community outreach groups — organizations that are already physically present in those communities,” she said.

The tax agency should set up an alternative claims process specifically for those not on the tax rolls, Speidel said. The IRS could also partner again with the Social Security Administration and the VA to identify the most vulnerable, she suggested, and “state welfare and food stamp agencies would be a natural partner for something like this.”

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