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Delivery of Economic Impact Payments (EIPs)

Changes from June 17, 2020 to July 7, 2020

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INSIGHTi Delivery of Economic Impact Payments (EIPs) Updated June 17July 7, 2020 To mitigate the financial hardship many Americans are experiencing during the Coronavirus Disease (COVID-19) pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136). A critical element of the aid package is direct payments to certain individuals in 2020. The payments are referred to as “recovery rebates” in Section 2201 of the act, but the Internal Revenue Service (IRS) calls them “economic impact payments” (EIPs) in the notices it shares with the general public. To qualify for a full EIP, an individual’s adjusted gross income (AGI) in 2019 cannot exceed $75,000 (or $150,000 for married couples filing jointly). The payment phases out for AGIs between $75,000 and $98,000 for single filers, and between $150,000 and $198,000 for joint filers. For more information on these payments, see CRS Insight IN11282, COVID-19 and Direct Payments to Individuals: Summary of the 2020 Recovery Rebates/Economic Impact Payments in the CARES Act (P.L. 116-136). This Insight presents a brief overview of the delivery of EIPs and identifies factors that might affect the timing and accuracy of their delivery. Delivery of Payments The IRS is administering the EIP program, with assistance from the Treasury Department’s Bureau of the Fiscal Service, which is issuing the payments. In doing so, it has drawn on its experience in administering a similar payment program established by the Economic Stimulus Act of 2008 (ESA, P.L. 110-185). According to figures from the IRS, most payments had been delivered by June 3, 2020. The CARES Act provided the IRS with $500.7 million to implement the program; the funds are available until September 30, 2021. By contrast, Congress appropriated $270 million for the IRS to implement the 2008 stimulus payments. EIPs have been distributed to three categoriesgroups of taxpayers:  eligible individuals who filed a return in 2019 (or in 2018 if no return for 2019 is filed before payments are disbursed); eligible individuals who were not required to file a return for either year and who received Social Security benefits, Railroad Retirement (RR) benefits, Supplemental Security Income, or certain Veterans Administration benefits in 2019; and Congressional Research Service https://crsreports.congress.gov IN11393 CRS INSIGHT Prepared for Members and Committees of Congress Congressional Research Service  2 all other eligible individuals who filed no return for either year and received none of the benefits listed in the previous category; these individuals are often referred to as nonfilers. Taxpayers in the first categorygroup automatically received a payment. Those who provided bank account information to the IRS in 2019 or 2018 to receive a refund got their payment via direct deposit. Some individuals who filed their 2018 or 2019 returns with the help of a tax return preparation firm may have experienced a delay in getting their payment. TaxpayersBut taxpayers in the first categorygroup who did not provide bank account information for those years to the IRS received a check in the mail, unless they used an online application from the IRS called Get My Payment to provide direct deposit information. Taxpayers had until May 13, 2020, to do so. Taxpayers in the second categorygroup (i.e., recipients of Social Security benefits, Railroad Retirement benefits, Supplemental Security Income [SSI], or certain Veterans Administration [VA] benefits in 2019) also also received a payment automatically. They did not have to file a return for 2018 or 2019 or provide other other information to the IRS. But in order to receive a $500 payment for a qualifying child, recipients of Social Social Security benefits, SSI, and certain VA benefits had to provide certain details through an online tool for for nonfilers (Nonfilers: Enter Payment Info Here page at IRS.gov) by early May May 5, 2020. Taxpayers in the third categorygroup must register with the IRS to get a payment, since the IRS would otherwise have no current contact information. This group encompasses an estimated 12 million people who were not required to file in 2018 and 2019 because their income was below the filing threshold for their filing status. To expedite the registration process, nonfilers in this category are encouraged to use the same online tool for nonfilers. The deadline for registering is October 15, 2020. Factors That May Affect the Delivery of EIPs 15, 2020. It took the IRS about 10 weeks to start distributing the 2008 ESA stimulus payments after enactment of the ESA. By the end of 2008, the IRS had delivered nearly 143 million payments worth a total of $107.3 billion. By contrast, the IRS began delivering the first round of EIPs 15 days after enactment of the CARES Act. By June 35, the IRS had delivered overnearly 159 million payments totaling about $267 billion; 120 120 million payments (or 75%) were delivered via direct deposit, 35 million (or 22%) as paper checks, and 4 and 3.7 million as prepaid debit cards. (As a point of reference, the Ways and Means Committee estimated at the outset of the EIP program that between 150 million and 170 million taxpayers would receive payments, and that the IRS would need to obtain information from 90 million to 110 million of them to deliver payments via direct deposit or a paper check.) payments via direct deposit or a paper check.) Several glitches have marred the delivery of EIPs. Prepaid debit cards have been sent to persons not expecting them who discarded the envelope containing them as junk mail. An estimated 365,000 persons have not received payments for dependent children, even though they had provided the IRS with the required information. And many individuals have had difficulty getting their questions about missing or incorrect payments answered by the IRS. Factors That May Affect the Delivery of EIPs There are several factors that may have affected the timing and accuracy of the IRS’s distribution of EIPs. One factor is the size of IRS’s workforce. It is 20% smaller today than it was when the IRS administered the 2008 stimulus payments. With this reduced workforce, the IRS is processing 2019 tax returns (which are due by July 15) while implementing the EIP program. Even allowing for an increase in overall productivity between 2008 and today, the agency may find it difficult to deliver EIPs to eligible taxpayers for whom it has no bank account information or a current mailing address. Another factor is the current status of the IRS workforce. In mid-March, to protect employees and taxpayers from contracting COVID-19, the agency closed its Taxpayer Assistance Centers and reduced taxpayer phone service. Then on March 30, IRS managers ordered employees who could work remotely Congressional Research Service 3 to do so immediately. It is unclear how teleworking has affected the EIP program. Although some employees returned to their offices in late April, there has been concern that remaining critical work for the program cannot be done in a timely manner by employees still working from home. To increase phone assistance for taxpayers with questions about their EIP, the IRS announced on May 18 that 3,500 phone operators had been recalled. Congressional Research Service 3 Some have been concerned There is a concern that a shortage of IRS employees with a good working knowledge of COBOL—the programming language for IRS’s core information systems since the early 1960s—might affect the delivery of EIPs to certain taxpayers. Yet another factor is the IRS’s seeming reliance on the internet to provide needed information and a mechanism for low-income nonfilers to receive a payment. Most EIPs have been delivered, and the IRS is now focused on delivering them to nonfilers for whom the IRS has no current information. Conducting outreach through the internet may not lead to the desired results, because many of these individuals may be having trouble accessing the internet, owing to the pandemic. Places where they normally may get access, such as public libraries, community centers, and volunteer taxpayer assistance centers, remain closed in many communities. According to an estimate by the Pew Research Center, 46% of American adults with household income below $30,000 do not own a computer. Nonfilers for 2018 and 2019 who do not register with the IRS by October 15, 2020, may be able to claim an equivalent payment if they file a tax return for 2020. Author Information Gary Guenther Analyst in Public Finance Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. IN11393 · VERSION 56 · UPDATED