Congress continues to negotiate another stimulus package. Meanwhile, although the IRS accomplished a Herculean task in delivering stimulus payments to millions of Americans in April and May, uncertainties and problems stubbornly linger for some people. Most recently, Nina Olson and Caleb Smith highlighted some of these issues here, here, and here.
The U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis recently published a July 22 letter from the Treasury Department responding to its requests sent on July 8, 2020. The Treasury response was puzzling to me in a few respects.
This blog post also discusses recent IRS website updates, which I noticed after William Hoffman of Tax Notes asked whether the IRS is changing its tune on non-filer federal beneficiaries who missed the deadline to claim an EIP for their dependents. Bottom line – it’s too soon to tell, but it can’t hurt to complete the non-filer portal.
Treasury Correspondence with the House Select Subcommittee on the Coronavirus Crisis
Nearly a month ago, on July 8, Representative James E. Clyburn, as Chairman of the House of Representatives Select Subcommittee on the Coronavirus Crisis, wrote to Secretary Mnuchin and Commissioner Rettig asking detailed questions regarding the Economic Impact Payments (EIPs) authorized by the CARES Act. Representative Clyburn emphasized that “the intent of these payments was to swiftly put money in the pockets of struggling Americans to help them meet their essential needs while supporting the nation’s economy” and expressed concern that “the eligible recipients still awaiting these payments are disproportionately low-income.” Among other questions, the letter asks Treasury, “What is your anticipated schedule to complete payment of EIPs to all eligible recipients?”
Perhaps due to the fairly short response timeframe, the Treasury Department’s response is a bit less detailed. The letter rightly touts the speed of the government’s response, compared to the 2008 stimulus payments. But it paints a pretty rosy picture that leaves out important details. For example, the Treasury letter states:
At this time, EIPs have been distributed to all eligible Americans for whom the IRS has sufficient information to make a payment. The CARES Act allows the IRS to issue EIPs through December 31, 2020. The IRS will continue to issue EIPs to eligible individuals through that date so long as it receives sufficient payment information in time to compute the EIP and certify it to Fiscal Service for issuance.
… The IRS encourages taxpayers who have not received their EIP and are not required to file a tax return to input their payment information into the “Non-Filers: Enter Payment Info Here” tool. To date, 6.8 million people have used this tool, which is still available.
But… what about the federal disability and retirement beneficiaries who were cut off from the nonfiler portal, who the IRS said had only until April 22 or May 5th to use the tool? The July 22 Treasury letter to Rep. Clyburn was called to my attention on August 3. As of that morning, the Non-Filer Tool website still contained this warning:
Reminder for SSA, VA, SSI and RRB Benefit Recipients with Dependents
The IRS has already scheduled payments to taxpayers based on Social Security retirement, disability (SSDI), or survivor benefits, Railroad Retirement benefits. Supplemental Security Income (SSI) and Veterans Affairs (C&P) benefit payments will be scheduled shortly for payment in mid-May. However, the window has closed to use this tool for these recipients who have a child and don’t normally file a tax return. These recipients who do not receive a payment that includes up to $500 for any qualifying children can file a tax return next year to determine their payment based on 2020 and claim any additional amount they weren’t paid this year.
This “reminder” had been posted on the non-filer tool since the deadlines passed May 5. Understandably, many non-filing federal beneficiaries did not use the tool if they found out about it after the deadlines – they understood from the IRS that it was closed to them. Some representatives assisted their federal beneficiary clients with the non-filer portal after that deadline, but I have not heard that any of those individuals received their full EIP for their dependents. This is a group of eligible Americans for whom the IRS has, or could easily have, information upon which to base a payment. Yet, contrary to the language in the Treasury letter stating that all have been paid, the IRS, presumably with the knowledge of the Treasury Department, has explicitly declined to pay these individuals.
One other point in the July 22 Treasury letter stood out to me. As to individuals without internet access, the letter says,
As an alternative to using [the non-filer] internet-based tool, the IRS has also provided a streamlined paper-filing procedure for individuals who have no requirement to file a 2019 return to submit information to the IRS in order to receive their EIP.
What is this? Has the IRS created a new form? No, sadly. There is no separate “simple” EIP form; it’s just a regular paper 2019 tax return, Form 1040 or 1040-SR, with “EIP2020” written on the top. Rev. Proc. 2020-28 (section 3, starting on page 6). The IRS has never said that federal beneficiaries can paper file to get their $500/child EIP. There is no fax number or special address to send the EIP return; it gets mailed to the regular address for filing the tax return. That paper return will join the pile of other paper returns waiting to be processed.
The Rev. Proc. also assumes that anyone who qualifies to use the “simple” return under section 3 could use the nonfiler portal instead, and pushes that option.
The allegation that IRS developed a “simple form” is undercut by the total lack of taxpayer-facing publicity for that option. No social services provider or SS/SSI beneficiary will know about the revenue procedure. The taxpayer-facing messaging is about using the nonfiler tool (if you qualify) or filing a 2019 tax return. That’s because the “simplified paper procedure” is not really any faster or simpler than filing a 2019 tax return. It’s not even mentioned as an option in the extensive EIP FAQ.
So, this part of the Treasury letter to Rep. Clyburn is misleading. To be sure, the letter does offer some important information, including an enclosure with some data on payments, which has the following chart showing payments as of July 17, 2020:
IRS EIP Website Updates
This brings me to the IRS website updates. On August 5, Tax Notes reporter William Hoffman alerted me to a change in EIP FAQ # 53, and asked what it meant for non-filer federal beneficiaries. The updated FAQ reads, in part
The IRS will automatically issue the additional $500 EIP per qualifying child to affected individuals in early August for those who used the Non-Filers tool before May 17, 2020. Direct deposit payments are scheduled for August 5, 2020, and paper checks or debit cards are scheduled to be mailed August 7, 2020. … If you used the Non-Filers tool on or after May 17, 2020, your EIP included $500 per qualifying child.
The immediate question in my mind was, does this FAQ even apply to federal beneficiaries? While IRS confirmation would be helpful, my impression is that this does not change anything for retirees and disabled individuals receiving SS, SSI, or VA benefits. The very next EIP FAQ, # 54, continues to read
You should not use the Non-Filers: Enter Payment Info Here tool if any of the following apply: …
● You are not required to file a return and already received your Payment based on your 2019 Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) and Veterans Affairs benefits even if you think you did not receive the full amount.
FAQ #56 also has not changed.
However, Mr. Hoffman’s inquiry also led me to check the non-filer portal website. Lo and behold, the IRS has removed the “reminder” that the portal is “closed” to federal beneficiaries. The portal page also contains the updated FAQ 53 language referencing the May 17 date.
At this time it is unclear whether this signals any real change in the IRS policy towards the SSA/SSI/VA beneficiary population. The IRS has not said that it would actually process dependent EIP claims received through the portal from federal beneficiaries who received a payment for themselves automatically. In fact, FAQ #54 continues to say the opposite. It’s possible that the IRS removed the “reminder” language simply to prepare for the next round of stimulus payments. FAQ #54 clearly states retired and disabled federal beneficiaries who have income below the filing threshold and have already received their EIPs should not use the non-filer portal to claim additional benefits, e.g., for dependents. Even if federal beneficiaries are no longer prohibited from using the non-filer portal, as long as the IRS refuses to process dependent EIP claims, disabled federal beneficiaries are functionally stuck in the same situation as in May, when the IRS announced that their window to use the portal had closed. By removing the language prohibiting use of the portal, the IRS is giving these low income persons false hope. In the context of the pandemic, that is just cruel and contrary to Congress’ intent to deliver the EIP rapidly into the hands of those that need the funds.