Stimulus Payment: Some struggling Americans will not receive the money they were promised. This is why


The problem is affecting approximately 8 million households that were not sent money directly, most commonly because the IRS did not have the correct information on file. Even though they are eligible, they will now have to claim it on their 2020 tax return, and if they owe back taxes or certain other types of debt, the IRS will remove it from the stimulus payment.

It has been more than a month since the Taxpayer Advocacy Service, an independent organization within the IRS, drew attention to the problem. He argued that the agency could find a way to make sure people get the money as intended.

The problem “is a problem that the law and the IRS have created,” wrote National Taxpayer Advocate Erin M. Collins, adding that “the rug is being pulled from people who are not eligible and have outstanding debts.”

The agency is reviewing what might be possible, a spokesperson told CNN this week.

However, people who have filed their 2020 tax returns may have already lost the cash and will have no way of getting it back.

IRS Rules Versus What Congress Wanted

Congress, which sent stimulus payments to millions of people last year and another round in December, aimed to make people who owe back taxes still eligible for the money.

In fact, lawmakers made it clear in the legislative text that they would still qualify. For payments of $ 1,200 authorized by the CARES Act last year, the payment was protected from all debts except delinquent child support. Congress expanded the exclusion for the second round of payments, up to $ 600 in value, ensuring that the money would not be offset even for child support owed.

But the situation gets complicated when a taxpayer has to claim the payment on a tax return, a kind of endorsement for the people that the Treasury did not pass when sending the money. Most people received the cash automatically, but many very low-income Americans who do not normally file taxes may have been lost. People who recently moved or changed their bank accounts might also have been lost.

The stimulus payment, however, is technically a tax credit, known as a Recovery Refund Credit, and tax credits can be offset for certain debts.
Those who have already received their stimulus money don’t have to worry about it getting back. But the lagoon could resurface for the people who are due to the expected third round of stimulus checks now being debated in Congress, which would send $ 1,400 per person.

A spokesperson for the House Ways and Means Committee, which drafted this part of the Covid relief bills, said lawmakers did not exclude the tax credit from debt offsets largely due to administrative difficulties. associated with the exemption of a single credit.

What can people do to claim their money

From now on, people are left with few resources. But an existing process called Compensation Bypass Refund allows people experiencing financial hardship to apply for an exemption so they can still receive their full tax refund.

But it is not guaranteed and there is a small window to apply: between filing your 2020 tax return and receiving the tax refund or invoice.

Biden’s drive to reach more people

Shortly after President Joe Biden took office, he signed an executive order directing the Department of the Treasury, which houses the IRS, to consider taking a series of actions to reach the millions of Americans who were eligible for the stimulus payment. but they did not receive it.
Most eligible adults received the money automatically. But very low-income people who don’t normally file tax returns had to go one step further and register with the IRS so the agency would know how to contact them. The IRS created an online tool to facilitate this process and has made efforts to partner with local groups working with homeless populations. Still, experts have said the government could be more aggressive in these efforts.

While the IRS is probably the best-suited government agency to handle sending money to millions of Americans, it is suffering from deep budget cuts and tasked with delivering the first round of stimulus payments at the height of the season. tax of 2019, when most of your employees were working from home.

Taxpayers have had trouble contacting the agency with questions (76% of calls went unanswered in the past year) and local Taxpayer Assistance Centers have cut in-person services to meet social distancing guidelines. A backlog of 2019 paper tax returns piled up, delaying not only tax refunds but stimulus payments as well.

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