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Where There is a Will, There is a Way: Economic Impact Payments for Victims of Domestic Violence and Abuse – Part I

Posted on Nov. 4, 2020

As the IRS ramps up for its final push to get Economic Impact Payments out to nonfilers and to those populations it unjustly denied earlier (e.g., incarcerated individuals, discussed here, here, here, and here, and federal beneficiaries with dependents, discussed here and here), there is one population that Treasury and the IRS have inexplicably denied assistance.  Consider the following scenario:

Susan is a victim of domestic violence and abuse.  In 2019, her husband prepared a married-filing-jointly 2018 Form 1040, which she signed.  In early 2020, before a 2019 return could be filed, Susan fled her abusive spouse and found short-term housing for herself and her children in a domestic violence shelter.  In March 2020 the pandemic hit, and Susan was desperate to get separate housing, even in a hotel, for herself and her two children.  To do that, she needed her 2019 tax refund.  However, all of her financial records were sent to her former home and she could not contact her spouse or have them forwarded out of fear of harm.  The IRS was not answering its phones, no Taxpayer Assistance Centers were open, VITA and TCE were not functioning, and she had no funds to pay a professional return preparer.

In early April, the IRS issued the Economic Impact Payment (EIP) to Susan’s spouse and herself, based on the 2018 MFJ return.  The payment was directly deposited into a financial account controlled exclusively by Susan’s abusive spouse.  Susan cannot contact her spouse to obtain her share of the EIP without exposing herself to physical and mental abuse.  Well-meaning friends who have attempted to secure Susan’s EIP from the abusive spouse have met with refusals and threats.  Susan is afraid that if anyone else contacts him in an effort to help her, they will inadvertently disclose her location, so she has asked friends to stop intervening.  Nor can she seek redress in small claims court without significant physical risk to herself and her children.

In the meantime, Susan has now filed a timely Married-filing-separately 2019 return for herself and her children.  The IRS customer service representative told Susan that because an EIP was already issued for her and her children based on the 2018 MFJ return, Susan will not receive an EIP based on the 2019 return.  The IRS assistor advised Susan she could attempt to claim the rebate recovery credit (RRC) when Susan files her 2020 return.  However, because Susan’s 2020 account shows that an EIP has already been issued under her social security number and for her children, the IRS will disallow the RRC claim on her 2020 return.  Susan is desperate because she needs the EIP and her refund to obtain safe housing for herself and her children, and so she can begin to build her life after years of abuse.

The example above is not an unusual case — it is well documented that domestic violence and abuse has increased under the economic stress, social distancing, and shut down restrictions resulting from the coronavirus pandemic.  In fact, according to the National Institutes of Health, 1 in 3 women and 1 in 10  men 18 years of age or older experience domestic violence at some point in their lives.  

It’s not as if Treasury and the IRS haven’t known about this issue.  Since the very beginning of the pandemic, advocates for victims of domestic violence and abuse (DVAA) (also called intimate partner violence or IPA) have called on the Department of Treasury and the IRS to create a process for DVAA victims to identify themselves and obtain replacement EIPs.

  • Early in the pandemic, Nancy Rossner of The Community Tax Law Project wrote about this issue and the importance of filing superseding returns in Procedurally Taxing here.
  • On May 8, 2020, Senator Jeanne Shaheen wrote to the Secretary of the Treasury and the IRS Commissioner, asking how the Treasury and IRS planned to deliver EIPs to victims of domestic violence. You can read the letter here.
  • On June 19, 2020, Senator Cortez Masto, along with 35 other Senators, wrote the Secretary of the Treasury and the IRS Commissioner, requesting they create a way for this population to receive EIPs. You can read the letter here. The Commissioner, both in his written response and in a later Senate hearing, (at 1:46:15) expressed sympathy but did not commit to any relief.
  • In a mid-September meeting with myself, Nancy Rossner, Melina Milazzo of the National Network to End Domestic Violence, and members of Senator Cortez Masto’s staff, the IRS Deputy Commissioner for Services and Enforcement said the IRS was very sympathetic but was concerned about documentation and whether the IRS had the authority to do anything.
  • On September 30, Congressmen Raskin and Fitzpatrick and Congresswoman Gwen Moore, along with 103 other members of the House, wrote the Secretary and the Commissioner requesting they find a way to issue EIPs to victims of domestic violence. You can read the letter here.
  • During an October 7th hearing before the Subcommittee on Government Operations of the House Committee on Oversight and Government Reform, Congressman Raskin asked the Commissioner about this issue; the Commissioner stated, “The CARES Act does not provide the IRS the discretion to add an additional, say in this context, $1200 to the victim of domestic violence.” You can watch the hearing here (see the domestic violence discussion at 1:25:07).

It is unclear why Treasury and the IRS are digging in their heels and taking this position.  I understand and am sympathetic to the concern of having to take on more work in the context of a pandemic, but its position flies in the face of what the IRS has done in similar situations in the past, without any express statutory authority.  The IRS has current processes in place that can be utilized to issue EIPs and RRCs to DVAA victims.  It does not need to re-invent the wheel and it does not need statutory authorization to do so. It also has systems in place to identify questionable claims.  In short, the IRS can implement a procedure whereby DVAA victims

  1. may attest they are victims of domestic violence and abuse, similar to the procedures adopted by IRS and Centers for Medicare and Medicaid Services (CMS) pursuant to Treas. Reg. 1.36B-2(b),
  2. may submit an affidavit, similar to that used for victims of identity theft (Form 14039) and return preparer fraud (Form 14157A) and
  3. may provide supporting information or documentation similar to that requested on Form 8857, Part V (see also, Part II, Questions 8 and 10).

In this and my next blog, I will take a deeper dive into how the IRS can actually do this, without the need for legislation. I want to thank Nancy Rossner and Melina Milazzo for their insights and help in developing this “roadmap” and, more importantly, for their advocacy on behalf of victims of domestic violence.

The IRS has the authority to issue replacement payments where refunds have been stolen or otherwise converted.

On multiple occasions the IRS has concluded it has the authority to issue a payment where the original payment was issued as a result of fraud or duress, or was converted. Moreover, in each of these instances, there is no explicit statutory authorization for issuance of a replacement check. For example, a taxpayer who is a victim of tax-related identity theft (e.g., an identity theft filing and obtaining a refund by posing as the taxpayer) may submit an identity theft affidavit (Form 14039) to the IRS along with or after filing his or her paper Form 1040. Upon review of the affidavit and any accompanying information and validation of the taxpayer’s identity, the IRS shall adjust the taxpayer’s account by removing the false return, posting the incorrect payment to a holding/dummy account, and process the taxpayer’s correct return and issue the correct refund. (See generally, IRM 25.23, Identity Protection and Victim Assistance.) The basis for these corrections is that the false return filed by the identity thief (or altered return filed by a return preparer) does not meet the Beard requirements for constituting a valid return of the taxpayer. (As a recap, Beard v. Commissioner held that for a return to be valid for purposes of the statutory period of limitations, “[f]irst, there must be sufficient data to calculate tax liability; second, the document must purport to be a return; third, there must be an honest and reasonable attempt to satisfy the requirements of the tax law; and fourth, the taxpayer must execute the return under penalties of perjury.”)

On the other hand, where a taxpayer alleges a return preparer has altered the return by directing the refund to the preparer’s account and then not paying over that refund to the taxpayer (aka “return preparer fraud”), per IRM 25.24, the taxpayer may file an affidavit (Form 14157A) with the IRS along with a police report, and after reviewing accompanying information and documentation, the IRS may move the original, converted refund payment to a separate account and issue a correct refund to the taxpayer.  Although the return in question may meet the requirements of the Beard test and constitute a return of the taxpayer, IRS Chief Counsel has concluded there is no legal prohibition to issuing a replacement refund where the taxpayer can show the refund was converted.  Thus, for example, IRM provides as follows:

Category 4: Misdirected Refund Only and Taxpayer Requesting Additional Refund. The taxpayer was in contact with a preparer for the year of filing and did authorize a return filing, but states although no tax data was altered, the direct deposit information or mailing address for the refund check was altered diverting all or a portion of the refund to the preparer.
The taxpayer states that he/she only received a portion of the refund or he/she received no refund.
Potential relief/resolution: The IRS will administratively remove the portion of the refund misdirected to the preparer and the taxpayer shall receive a refund for the entire amount due from the original valid return, less any amounts already received. [Emphasis added.]

In the context of the 2008 Economic Stimulus Payment (ESP), the IRS had procedures to issue replacement payments to victims of identity theft, where payments where issued based on returns submitted by identity thieves or were sent to bank accounts controlled by the identity thief.  The IRS has similar procedures in place for the 2020 EIP.  (“Additionally, if individuals have not received the EIP because they suspect they are victims of identity theft, taxpayers should submit Form 14039, Identity Theft Affidavit, and notate “Stolen EIP” at the top of the form.” National Taxpayer Advocate, Fiscal Year 2021 Objectives Report to Congress, at 58).  For example, IRM provides:

When the amount of EIP allowed based on an invalid (IDT) return, mixed entity (MXEN), or invalid joint election (IJE) is the same as the amount of EIP the valid taxpayer is entitled to, an adjustment to EIP is not necessary. Input TC 290 .00 with BS 05, SC 0, and HC 3. Use RC 139 for IDT cases. Use RC 099 for MXEN and IJE cases. When the EIP has been issued to someone other than the CN owner, follow the applicable procedures below:

Streamline IDT cases: Follow procedures in IRM, Reversing Identity Theft (IDT) Lost Refunds, to resolve an EIP issued to the invalid taxpayer.

Non-streamline IDT cases: Create a Dummy tax year 2020 module for the IRSN. Follow procedures in IRM, Moving Refunds, to move the EIP to the 2020 module for the IRSN.

○ MXEN and IJE cases: Create a Dummy tax year 2020 module for the other TIN. Follow procedures in IRM, Moving Refunds, to move the EIP to the 2020 module for the other TIN.

None of the examples and procedures cited above are based on explicit statutory authority. They are based on determinations of fraud or conversion perpetrated by third parties, whether that fraud involves the filing of a false return that does not constitute the return of the taxpayer or the conversion of a refund due to the taxpayer.

In my next blog, I’ll discuss the IRS’s experience with victims of domestic violence in the context of IRC § 6015 relief and other IRC provisions. And I’ll explain in greater detail how the IRS can utilize its existing procedures to issue EIPs or RRCs to DVVA victims.

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