WASHINGTON - As the U.S. Treasury rushes to distribute second stimulus payments, many Americans learned this week that they will not receive the $600 until they file their 2020 tax return, a delay threatening additional hardship.
The Treasury has paid out about 68% of the payments so far, with millions of Americans receiving their $600 via direct deposit or a check in the mail. Yet, some Americans are still waiting to receive their money, and others will not receive any money until they file their 2020 tax return.
The IRS declined to say how many people are affected by the requirement to file a tax return before receiving a stimulus payment, but the National Consumer Law Center said it could be up to 20 million.
While the IRS is getting more of the money out faster than it did in 2020, the agency is facing mounting public criticism for delaying stimulus payments for some Americans until they file tax returns, especially as the economy continues to deteriorate amid the surging pandemic.
“The problem is this bill was passed right at the start of the 2020 tax season,” said John Koskinen, the former IRS commissioner under President Barack Obama. “This has all hit when critical testing of the operations of the tax filing system are going on, and without delaying some checks, they can’t get it all done. But it’s not helpful to people waiting for money.”
The IRS is urging people to use the “Get My Payment” tool on the IRS website to check the status of their payment. If that tool returns a message that says “Payment Status #2 - Not Available,” then the person will not be receiving a payment via direct deposit or check in the mail, according to an IRS statement issued late Tuesday.
People who receive the “not available” message are supposed to claim the credit on their 2020 tax return, which they can begin filing later this month. Americans have until April 15 to file taxes.
“The IRS advises people that if they don’t receive their Economic Impact Payment, they should file their 2020 tax return electronically and claim the Recovery Rebate Credit on their tax return to get their payment and any refund as quickly as possible,” the IRS said.
People have flooded social media in outrage over the IRS decision to force some people to wait to get the money by filing their taxes.
“My heart was just sinking more and more when I realized we weren’t going to get the money, and we’ll have to get by the next two weeks until payday with $80 in our bank account,” said Megan Kramar, a mom in Salt Lake City. “I couldn’t sleep last night. I don’t know what we are going to do. We were counting on this money.”
Kramar and her husband, who lost nearly all of his commission-based work in the airline industry last year, have been skipping breakfast and lunch to ensure there is enough food for their three young children. They were expecting a $3,000 stimulus check to arrive this week, money they desperately needed for food and bills. They are behind on their van payment, their light bill and their gas bill. Their car is due for repossession, and Kramar fears they will lose it if they have to wait weeks to get their stimulus money after filing their 2020 taxes.
Some Americans are confused as to why they received a first stimulus check last year from the IRS but are getting the “status not available” message about their second stimulus check.
The IRS says that if a payment is sent to a bank account that has been closed or is no longer active, then the bank must send it back to the IRS. In the spring, the IRS issued a check or debit card payment in the mail or gave people a chance to update their bank account data if a payment came back in error, but that is not occurring this time around.
The IRS must issue all payments by Jan. 15, because then the IRS needs to focus on the 2020 tax filing season.
Treasury has paid out $112.3 billion so far in the second round of the Economic Impact Payments, according to data released Monday. That is about 68% of the $164 billion that is expected to go out in this second round of direct aid payments.
Many analysts applaud the Internal Revenue Service for sending out payments within a week of President Donald Trump signing the bill authorizing $600 payments to most American adults who make $75,000 or less as an individual or $150,000 or less as a couple, plus an additional $600 per child. But people who are still waiting for the money were stunned to learn they might not get it for months.
Some who used TurboTax, Jackson Hewitt H&R Block or another tax preparation service to file their 2019 taxes say they are among those who are not able to receive the second stimulus payment.
The National Consumer Law Center blamed the IRS for not being ready after it had months to prepare for this second round of aid payments. As many as 20 million people could be impacted by the tax preparer glitch, they said.
“It is disappointing that the IRS did not fix this problem, which it has known about for months, in light of the likelihood of a new round of stimulus payments,” NCLC associate director Lauren Saunders said in a statement. “People who need money now may have to wait months until they can file a tax return and get their refund, unless the tax prep companies are able to forward the funds.”
Often, people who use these services to file their taxes pay for the service by having TurboTax, Jackson Hewitt or H&R Block take the fee out of their tax refund. When that happens, the tax preparer often gives the IRS a back account to route the fee and the client’s back account for the rest of the refund. The problem is the account where the tax preparer’s fee goes is often listed first on the tax return. Some of those accounts are not accepting payments now, so the stimulus checks are bouncing back to the IRS.
“I want to know what the IRS is going to do. There appear to be hundreds of thousands of people filing through TurboTax and using the refund service. Now we’re all screwed. Every single one of us,” said Khyre Stuckey, a mom in Hummelstown, Pa.
Stuckey received the first payment into her credit union account without any problems last April, but now she is seeing the “status not available” message on the IRS website when she checks her account. It appears the IRS did attempt to send her money, but it did not go through. She was counting on the funding to help pay for a trip to Philadelphia for her daughter to see specialist doctors next week to try to figure out a health problem. Now the family isn’t sure how they will pay.
TurboTax said Wednesday that it is working with the IRS to fix the issue.
“Unfortunately, because of an IRS error, millions of payments were sent to the wrong accounts and some may not have received their stimulus payment,” TurboTax said in a statement on its website. “We have been working tirelessly on a solution with the Treasury and the IRS. As a result, our expectation now is that within days the error will be corrected and stimulus payments will begin being deposited into the correct bank accounts.”
President-elect Joe Biden has indicated he wants to send most Americans $2,000 payments. If Democrats win control of the U.S. Senate, that is likely to be enacted, but these latest payment delays raise questions about how quickly that money could go out, especially in the midst of tax filing season which runs from about mid-January to April 15.