In recent months, the Internal Revenue Service (IRS) has been working hard to get stimulus or Economic Impact Payment (EIP) payments out to approximately 180,000,000 U.S. citizens. To date, the agency estimates they have sent out about 160,000,000 of those payments. While the process hasn’t gone as smoothly as President Donald Trump would have wanted, people have been getting some of the relief they need so desperately because of the COVID19 virus pandemic.
The IRS has been issuing these payments on behalf of the U.S. Treasury as part of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. The CARES Act was signed with bipartisan support in March of this year.
As a reminder, the stimulus checks have been going out in the amount of $1,200 for single taxpayers and $2,400 for married couples. The payments are suppose to include another $500 per dependent under the age on 16 years old. There are income caps in place to stop payments from going to high income individuals.
Fixing the Dependent Issue
It’s worth noting that the IRS is still processing millions of checks and electronic payments for a variety of reasons. They hope to have all first round payments out by the middle of October.
Part of what the IRS has been working on is getting outstanding $500 payments per dependent out to taxpayers/citizens who haven’t yet received them. These payments are intended for taxpayers who can rightfully claim said dependents. These additional payments have been going out to individuals who don’t usually have to file tax returns. That would include Social Security recipients who don’t need to file taxes unless they have other sources of income. The reason some of these payment haven’t been going out is that unless taxpayers file returns and claim dependents, the IRS has had no way of knowing which taxpayers have dependents.
Late in the game, the IRS did make moves to address this problem. They did so by creating an online portal (non-filer tool) that taxpayers have been using to enter dependent information. For what it’s worth, the deadline for entering dependent information is currently September 30, 2020. Checks should be going out shortly after taxpayers have entered the necessary information.
Fixing the Child Support Issue
The CARES Act authorized stimulus payments to all U.S. citizens except for one specific group. Congress did not want stimulus payments going out to citizens who were or are in arrears on their child support payments. To whatever extent a taxpayer owes back child support payments, the IRS has been diverting the taxpayer’s stimulus amounts to the spouse who was or is due that money.
Unfortunately, a glitch in the system has been creating a problem. Spouses who are owed child support payments have had their stimulus payments withheld to pay down the outstanding child support payments that are due them. Let that sink in for a minute. Taxpayers have been having their stimulus payments withheld to offset child support that their spouse owes to them.
After five months, the IRS has realized the extent of the problem and will be taking steps to fix it. Anyone who has previously submitted a Form 8379, which is also referred to as “Injured Spouse Allocation” will be getting additional checks starting next month. The checks will be going to taxpayers who have wrongfully had their stimulus payment withheld.
According to an IRS representative in a press release: “The IRS will automatically issue the portion of the EIP that was applied to the other spouse’s debt.”
The IRS is currently estimating there will be approximately 50,000 checks going out to fix this issue. While the IRS anticipates that no one will need to do anything to receive any of these monies due to them, taxpayers do have the option of filing the Form 8379 as soon a possible. They can also file 2018 or 2019 federal tax returns as a reminder to the IRS that they might fall into this category.
The IRS is making these self-described “catchup” payments in an effort to make sure all Americans get everything they have coming based on the intent of the CARES Act. The goal is to clean the slate for issues coming from the first round of stimulus in anticipation there might be a second payment forthcoming.
Future Stimulus Payments
As of today, Congress has not yet authorized another round of Economic Impact Payments, but some negotiations have been taking place. It would seem both Democrats and Republicans, plus President Trump, are on board with the concept of additional payments. With that said, it’s fair to say that politics are getting in the way of any new legislation. The sticking points to new stimulus legislation includes National Debt concerns and issues related to the extent of payments and to whom they should be going.
If he could, President Trump has indicated he would authorize another round of stimulus payments via an executive order. Unfortunately, the Constitution does not allow him to authorize such payments. It’s worth noting that he was able to extend federal unemployment benefits and put a hold on evictions with the stroke of his Presidential pen.
