For Miami’s unbanked, stimulus checks come with hurdles
■ For those in Miami’s informal economy, referred to as the unbanked, getting access to stimulus money means going to a tax preparer. In the time of social distancing, that’s a high hurdle.
Aware of the horror stories about Florida’s dismal system for filing unemployment claims, home healthcare worker JeanClaude Theoc is placing his bet on the Internal Revenue Service and the promise of quick dispersal of federal stimulus checks.
The problem is that Theoc is one of the large but hard to quantify numbers of the unbanked, people whose income is either too low or too spotty to have an established relationship with a bank. And for the Haitian immigrant in Pompano Beach, it means he will be waiting for at least a month before he gets a check from the IRS by mail.
Unlike a smaller stimulus effort in April 2008 as the global financial crisis took root,
the stimulus plan passed by Congress on March 27 allowed persons like Theoc who didn’t file a return last year to apply for a one-time stimulus payment of up to $1,200. He turned to a local tax preparer to help him navigate the IRS website to file personal information so that he can get his check by mail. That amount is considerably larger than the maximum $275 a week maximum offered by Florida’s euphemistically named Reemployment Assistance Program,
“It’s not going to do much, but there is nothing we can do about that,” said Theoc, who is in his 50’s and hasn’t worked much in the past two years. He was let go about a month ago when home health providers became viewed as potential transmitters of COVID-19.
Theoc received his wages by an actual physical check and cashed it. Like many low-income workers, he typically goes to a checkcashing store, which turns the check into cash for a fee.
“Somehow it is in the psyche that they want to see [the check] first,” said Killick Joseph, a veteran Miami tax preparer who works with the city’s largest Haitian immigrant community.
An estimated 80 percent of U.S. tax filers have an online relationship with the IRS, either receiving their refunds via direct deposit into bank accounts or filing their tax returns electronically. But that other 20 percent represents a population that generally has the smallest savings and depends most on this stimulus money.
“The issues here are demographics,” said Steven T. Miller, who spent a quarter century at the IRS and closed out his career as acting IRS commissioner in 2012. “How do you get to those people, as part of that how do those people get to the IRS. The phone system is not going to be good for that, even for the trusted partners.”
Joseph Tax Services is following local stay-athome guidelines, working with clients by phone to help them navigate an IRS website that is complex enough for those like Joseph who are in the business.
There are some immediate challenges. For those who didn’t file returns last year, during the account creation process now the individual must provide a Social Security number and a telephone number, and then a verification code is sent. If that phone number is registered under someone else’s name or a family plan, you can’t get processed in the system.
“If the names don’t match, you can’t get in,” said Joseph. He describes the current challenge of working remotely with the unbanked to set up IRS accounts as “a logistics nightmare.”
But there are also several positive changes in the new federal stimulus. Back in 2008, it only applied to people who reported $3,000 in annual income. Today those who didn’t report income last year can apply.
And for people on disability or who receive Social Security, federal stimulus money should come automatically by direct deposit or mail. There no longer is an application requirement.
“The good news is they don’t have to file anymore,” Joseph said.
It’s not without a bit of irony that the IRS is now a centerpiece of the plan to deliver Americans much needed stimulus checks. For much of the past decade, politicians have heaped abuse on leaders of the IRS and underfunded the agency.
The agency aims to begin sending out the first wave of stimulus checks as early as this week, but the timing couldn’t be worse. Even though President Donald Trump pushed back the filing deadline until July 15th amid the coronavirus crisis, millions of Americans are in the process of filing now, hoping to both get a refund on their 2019 taxes and the stimulus check.
“Let’s face facts. The service, in terms of its ability to adjust to all these things, it is going to be challenging,” said Miller, now a tax attorney and advisor with the Alliant Group. “The Hill always seems to forget that these things can’t be magically done. They take time for testing, and they don’t have a lot of time here.”
What complicates matters for the IRS, said Miller, is its cycle of seasonal hiring nationwide. It ticks up early in the year ahead of the tax-filing deadline, and the shifts to downstream activities such as enforcement and fraud prevention. Now with the deadline moved to July, everything is going to be off kilter.
“All these things sort of have to shift, both the programs and the people have to be rescheduled,” said Miller. “It’s not a small thing. I don’t think people realize your entire business is cyclical. It compresses it.”
And getting this right is important, he added, because for most people their IRS refund and now the stimulus check represent the largest lump-sum payment they receive in a given year.
The most immediate challenge to the IRS is that the programming and preparation is done at a time when the federal government’s workforce, like the civilian workforce, is largely working from home.
“The IRS has to manage its workforce in this environment with extensive teleworking,” said Daniel Werfel, who served as acting IRS commissioner in 2013 and is now a partner at the consultancy Boston Consulting Group. “It is not an insignificant endeavor to adjust the filing deadline. There is the building of the payments file for the three-week turnaround (on stimulus checks). That is a fairly complicated solution that they are working on.”
It’s a lot to ask from an agency that suffered cuts back and repeated attempts to bring impeachment proceedings in 2016 against then-Commissioner John A. Koskinen by House Republicans. They accused him of obstructing their investigation into alleged favoritism in 2010 by the IRS division that has enforcement powers over non-profit political organizations.
“They have faced significant budget cuts over the last eight or nine years and that has forced them to divert from hiring, training et cetera,” said Werfel. “That certainly makes these challenges harder. That’s a key part of the picture.”
Werfel hopes the crisis serves as a teachable moment.
“I think it is an important long-term lesson to be learned around decisions that we make as policymakers and legislators to divert or cut budgets for critical activities, and then find yourself in a spot where you need a robust and high-functioning organization to execute on something that is mission critical when you are facing crisis,” he said.