Tax News

CCH (cch.taxgroup.com) reports:

  IRS Commissioner Douglas Shulman's general message to Congress on June 19 was that the economic stimulus payment program is going well and that problems that have arisen have been addressed aggressively. Testifying at a joint hearing before the House Oversight and Social Security Subcommittees, the Commissioner appeared to assuage Congressional concerns about "trying to get money into the hands of people who need it the most." He addressed efforts to reach economic stimulus payment recipients with whom the IRS does not normally communicate, problems some recipients have had in claiming the child tax credit portion of the payment, confusion over how taxpayers with refund anticipation loans would receive their payments, and the IRS's plans to accelerate payments to military couples who have become eligible for a stimulus payment because of enactment of the Heroes Earnings Assistance and Relief Tax of 2008 (P.L. 110-245). Nina Olson, IRS National Taxpayer Advocate, also testified in agreement with most of the Commissioner's commentary, yet she also suggested that the IRS may not have been the best agency to handle the economic stimulus payment regime.

Assisting Retirees and Disabled Vets

  Shulman reported that, despite the passage of the Economic Stimulus Act of 2008 (P.L. 110-185) in the middle of the 2008 tax filing season, the IRS has been very successful so far in its efforts to send out payments to eligible taxpayers. The agency also worked closely with the Social Security Administration (SSA) and the Department of Veterans Affairs (VA) in identifying retirees and disabled veterans who did not normally file income tax returns, yet were also eligible for stimulus payments. "Outreach was incredibly important," Shulman stated, "we tried to publicize that all you needed to do was file a tax return to get a stimulus payment. We also paid special attention to the potentially 20 million people who usually don't file a tax return but should file a tax return this year in order to receive their economic stimulus payment."

  He also announced that the agency is getting set to launch a "summer campaign" to assist those Social Security recipients and veterans in correctly filing a tax year 2007 income tax return so that they may receive their entitled payments (IR-2008-80; TAXDAY, 2008/06/20; I.1). Shulman told subcommittee members that the IRS will be distributing to each member of Congress an informational packet of demographic data regarding their constituents who fall into the category of Social Security recipient or veteran, have not yet filed a 2007 return, and, therefore, have not yet received an economic stimulus payment.

Child Credit Problems

  Shulman also reported that the agency recently became aware of some taxpayers with qualifying children who did not receive their full economic stimulus payment. The problem, he explained, was that in most cases they did not check the box on their income tax return claiming the child tax credit, which was used to signal the IRS computers to pay out the additional $300 child amount of the economic stimulus payment. Also, some tax return preparation software had failed to include this box entirely.

  Shulman reported that, during a normal tax-filing season, the agency would have sent the return back to the taxpayer for correction. This year, however, because of the urgency of getting economic stimulus payments out promptly, the IRS is making the corrections itself. "Under the normal circumstances of tax administration," Shulman stated, "We'd say: "either the taxpayer didn't do it right or the software vendor didn't do it right," so we would send it back to the taxpayer and say: "file it correctly. If you file it correctly, then you will get the stimulus payment." Because it was so important that we go the extra mile with these people, about 230,000, we are actually now correcting their returns for them, correcting the error the software filing taxpayer made, and running a batch of new stimulus checks. In July, people will get an extra $300 per child they were due under economic stimulus. That's the kind of thing we're trying to do ... be very aggressive in making sure we fix problems as we see them."

RALs

  Shulman was also quick to correct public misunderstanding about the interaction between refund anticipation loans (RALs) and administration of economic stimulus payments. Shulman told the subcommittee that, in sending out economic stimulus payments, the IRS ignores the temporary accounts created for taxpayers receiving refund anticipation loans. These accounts generally have special markers indicating their nature to IRS, which allows the agency to avoid sending automatic deposit payments to the taxpayer. Instead, the agency is directly sending out paper stimulus checks to taxpayers with outstanding refund anticipation loans. Shulman remarked that some taxpayers were under the impression that the agency would directly deposit the payment into those temporary accounts and were concerned when they did not receive payment during the recent round of direct deposit stimulus payments issued this past May. He further explained that, because paper checks are being sent out to taxpayers on a later time table than automated deposits, the process for RAL taxpayers is set not to be completed until July.

HEART Act

  Commissioner Shulman also spoke on the agency's plans for the administration of stimulus payments under a special provisions within the recently-enacted Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008. Under that Act, families of active-duty military members may qualify for the economic stimulus payment, even though one spouse may lack a social security number --as originally required under the Economic Stimulus Act. He admitted that the agency initially estimated that it could not send economic stimulus payments to those families now included under the HEART Act until the 2009 filing season. However, he reported that IRS has reinvestigated this task and now plans to send those payments out no later than November of this year.

Taxpayer Advocate's Testimony

  Olson, testified similar to much of the Commissioner's comments. Both Shulman and Olson confirmed that telephone services responding to economic stimulus payment queries were currently stretched beyond their limits. Olson reported that only one in ten callers to the economic stimulus payment line received an immediate answer to their question. Shulman confirmed that taxpayers face an average 13 minute wait time for economic stimulus questions.

  However, Olson additionally suggested that IRS may not be the best equipped agency to deal with sending economic stimulus payments to social security recipients and veterans. She pointed out that while they consistently receive benefit checks from SSA and the VA, these citizens have little current contact with the IRS. She also reflected that the requirement to file an income tax return, while simple sounding to most people, may be too much of a burden for older citizens --even with the guarantee of receiving a $600 check. Yet, one Congressman disagreed with this suggestion, pointing out that the SSA was too overstretched beyond its resources in trying to process outstanding disability claims. He advocated that putting the responsibility for the economic stimulus payment regime upon the SSA would reverse the progress that agency had made in its responsibilities over the last several years.

  By Torie Cole, CCH News Staff