Color of Money

The IRS has stumbled badly over the distribution of payments to parents who receive federal benefits. If they don’t normally file a federal return because of low earnings, the IRS doesn’t know if they have children that qualify them for the $500 stimulus payment. Even though their stimulus payments were sent automatically, those parents still must use the non-filers tool to claim the additional funds for their eligible dependent children.

The non-filers tool also allows people to provide banking information for direct deposit information, hopefully reducing the time it takes to receive a stimulus payment.

The IRS said the new letters are being mailed to people who haven’t filed a federal return for 2018 or 2019. The agency was able to identify the recipients by looking at W-2s, 1099s, and other third-party statements.

The mailings should go out around Sept. 24 and will have an IRS address. This last bit of information is important because so many of the glitches that have plagued the distribution of the stimulus payments have involved confusing and conflicting communications with recipients.

Many people received their stimulus payments on a preloaded debit card. The problem was the IRS sent the stimulus debit cards without direct communication to taxpayers it was coming. So, when the cards arrived in a plain envelope that didn’t indicate it came from the IRS, many people mistook it for junk mail or a scam. And they threw away the cards. That resulted in the Treasury having to mail more than 788,000 letters telling people how to collect their money if they tossed the payment out by mistake.

The cards, sent in May and June, were issued by MetaBank and came in a plain envelope from a company called Money Network Cardholder Services.

This time, to help avoid the same mistake as with the stimulus debit cards and avoid fraudulent copycats, the IRS has posted a copy of its letter it will be sending out at irs.gov. Receiving a letter doesn’t automatically mean a person qualifies for a stimulus payment. “An individual is likely eligible if he or she is a U.S. citizen or resident alien; has a work-eligible Social Security number, and cannot be claimed as dependent on someone else’s federal income tax return.”

The IRS says so far more than 7 million people have used the nonfiler tool to claim a stimulus payment.

One caution: Do not use the non-filer tool if you have filed or intend to file a 2019 federal return. You can still get your stimulus payment by filing a return. The IRS is processing stimulus payments based on recently filed electronic returns.

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