Stimulus Payment: Some struggling Americans will not get the money they were promised. Here’s why

Stimulus Payment: Some struggling Americans will not get the money they were promised. Here’s why

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The problem is an estimated 8 million households that did not send the money directly to them, mostly because the IRS did not have the correct information on file. Although they are eligible, they will now have to claim it on their 2020 tax return – and if they owe tax or certain other types of debt, the IRS will take it out of the stimulus payment.

It’s been more than a month since the taxpayer’s advocacy service, an independent organization within the IRS, paid attention to the case. It argued that the agency could find a way to make sure people received the money as they intended.

The issue ‘is a problem that the law and the IRS have created’, wrote Erin M. Collins, the national taxpayer’s lawyer, adding that ‘the carpet is being pulled out among suitable individuals with outstanding debt.’

The agency is investigating what is possible, a spokesman told CNN this week.

However, people who filed their tax returns for 2020 could have lost all the cash and had no way of getting it back.

IRS rules against what Congress wanted

The congress, which last year and another round in December sent stimulus payments to millions of people, was meant for people who owe taxes, to still be eligible for the money.

In fact, legislators made it clear in the legislation that they would still qualify. For the $ 1,200 payments approved by the CARES Act last year, the payment is protected against all debts except guilty child support. Congress extended the exclusion for the second round of payments, up to $ 600, and made sure that the money would not even be set off for child support due.

But the situation becomes complicated when a taxpayer has to claim the payment on a tax return – a kind of backstop for people who missed the Treasury when they sent out the money. Most people received the cash automatically, but many low-income Americans who do not normally file taxes could miss it. People who have recently moved or changed their bank accounts could also fall through the cracks.

However, the stimulus payment is technically a tax credit, known as the Repayment Short Credit, and is allowed to offset tax credits for certain debts.
Those who have already received their incentive money do not have to worry about it. But the gap may re-emerge for people who are due to the expected third round of stimulus checks now being debated in Congress, which would pay $ 1400 per person.

A spokesman for the House Ways and Means Committee, which wrote this piece of the Covid relief bills, said lawmakers do not exclude the tax credit from debt compensation, mainly due to administrative issues related to the release of a lone credit .

What people can do to claim their money

From now on, people have used little. But an existing process, called an Offset Bypass Reimbursement, allows people experiencing economic hardship to apply for a waiver 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 refund or tax bill.

Biden’s pressure to reach more people

Shortly after President Joe Biden took office, he signed an executive order directing the Treasury Department, which houses the IRS, to consider taking a series of actions to reach the millions of Americans eligible for stimulus payment but did not receive one.
Most eligible adults received the money automatically. But people with very low incomes who do not normally file tax returns had to take an extra step and register with the IRS so the agency knows how to achieve them. The IRS has created an online tool to facilitate this process and has made an effort to work with local groups working with homeless people. Yet experts have said the government could be more aggressive in these efforts.

While the IRS is probably the best-suited government agency to send money to millions of Americans, it hurts because of the depth of the budget and was tasked with delivering the first round of stimulus payments at the height of the 2019 tax season when most of his employees were working from home.

Taxpayers have had trouble reaching the agency with questions – 76% of calls were left unanswered last year – and local taxpayer help centers have reduced personal services to meet social waiver guidelines. An overdue return of paper tax returns for 2019 has been built up, delaying not only tax refunds but also incentive payments.

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