The poorest Americans are among the least likely to have received a direct payment authorized by the federal government four months ago. While they continue to wait for their first relief check, lawmakers are talking about sending out another round.
The IRS has issued about 160 million economic impact payments approved under March’s CARES Act (Public Law 116-136), distributing hundreds of billions of dollars in aid through direct deposits, paper checks, and prepaid debit cards. But that leaves millions of eligible people who haven’t received a payment of up to $1,200 per individual and $2,400 for married couples.
Republican lawmakers this week proposed a $1 trillion relief package that includes another round of direct payments, something that House Democrats proposed in their own relief bill (H.R. 6800). Difficulties in getting payments to some populations, like the homeless or people in abusive relationships, means that Congress is negotiating a package that could give many Americans a second financial boost while the most vulnerable haven’t gotten any relief at all.
The hardest part about reaching those individuals is they don’t normally file a tax return because they don’t have enough income, so the IRS simply doesn’t know who they are, said Terry Lemons, the agency’s chief of communications and liaison.
“It’s not like there’s a list,” Lemons told Bloomberg Tax in an interview.
Hard to Reach
Many of the people who haven’t received their payments aren’t aware they are eligible because they live in group homes or shelters and lack modern technology, making outreach especially difficult, said Aisha N. Servaty, assistant supervising attorney and director of the low-income taxpayer clinic at Mid-Minnesota Legal Aid in Minneapolis.
“The IRS needs to find a way to reach taxpayers who don’t have access to social media, who aren’t watching television, who aren’t even listening to radios,” Servaty told Bloomberg Tax.
Her clinic in the last three months has handled about 250 cases involving non-filers attempting to access their economic impact payments, with at least 10 new cases added each week.
Edward Shramek, an individual living in subsidized housing in St. Paul, Minn., is one of the people that Servaty’s clinic has helped. Shramek said he found out he was eligible for a payment after talking to another resident in his building.
“At first I never even thought that it was meant for people in my situation,” he said.
Lemons of the IRS said the agency has taken “unprecedented steps” to make non-filers aware of the CARES Act payments, including working with about 13,000 organizations. That includes more than 100 local homeless organizations across the country.
Servaty suggested that the IRS could reach out to municipal workers who frequently have contact with low-income individuals and have the Post Office put up signs about the payments. Many non-filers use the general delivery mail service available for people without permanent addresses, she said.
Awareness hasn’t been the only challenge: Practitioners at low-income taxpayer clinics say the agency’s designated phone line for economic impact payment questions hasn’t been as useful as it should be.
“It can be difficult to get in touch with someone to figure out what’s going on and you can often get the run-around about who can actually help you with your situation,” said Omeed Firouzi, an attorney at Philadelphia Legal Assistance’s low-income taxpayer clinic.
The IRS, which had to temporarily close call centers because of the pandemic, is working through a backlog now that phone lines are open again.
The communication issue is one of several that have caught the eye of Democratic lawmakers.
House Ways & Means Chairman Richard Neal (D-Mass.) and Senate Finance Committee ranking member Ron Wyden (D-Ore.), in a recent letter to IRS and Treasury, highlighted difficulties with the IRS phone service.
The lawmakers said that as of July 10, the agency had received about 15.4 million calls to its EIP phone line, of which more than 14 million got an automated recording and almost 50,000 were dropped.
“Sadly, only 800,000—5% of all callers—were able to speak with IRS staff who had access to taxpayer-specific data after waiting an average of 36 minutes on hold,” the lawmakers said. “The IRS must strive to do better.”
The Treasury Department didn’t return a request for comment on the lawmakers’ letter.
Even those who have gotten through to the IRS haven’t necessarily received the help they need. Some practitioners who have power of attorney have been told that they can’t access specific information on their clients’ cases and that the actual taxpayer has to call, according to Nancy Rossner, a senior staff attorney at the Community Tax Law Project in Richmond.
Practitioners identified two other problems that people who don’t file tax returns have run into when trying to get their CARES Act payment.
One issue is for couples where one person receives Social Security or Veterans Affairs benefits and got their payment automatically, said Silya Shaw, managing attorney for the central office of Legal Aid of Western Missouri.
In that scenario, the spouse who didn’t get their payment has to use the agency’s non-filer tool, which only allows a person to choose “single” or “married filing jointly” as a filing status. The IRS website instructs people in that scenario to select “single” as their filing status. But Shaw has seen several instances where people have mistakenly selected “married filing jointly,” which causes the IRS system to determine that no money is owed because it doesn’t recognize that two separate payments have to be made.
Other non-filers are finding out they were unknowingly claimed as dependents on someone else’s return, even if they aren’t actually dependents, several practitioners said. They noted that this problem doesn’t just affect college-aged individuals, but also adults that are 24 or older.
The CARES Act included a $500 supplemental payment for dependents under the age of 17. Both parties have proposed to expand eligibility to cover older children and adult dependents. Democrats have also proposed increasing the payment amount per dependent.
Servaty has helped clients incorrectly claimed as dependents submit identity theft affidavits to the IRS to request their payments.
“We don’t know if and when they’ll get their stimulus payments,” she said.
The IRS, when asked about this situation, directed Bloomberg Tax to a FAQ on the agency’s website that indicates people who aren’t claimed as dependents in 2020 will be able to receive their payment, which is technically an advance on a 2020 tax credit, when they file a return next year.
—With assistance from Lydia O’Neal.