The IRS reports that approximately 130 million of the expected 150 million stimulus payments have already been distributed. There are a number of reasons why certain eligible taxpayers have yet to receive their payments, including incorrect or incomplete direct deposit information and paper check processing time. Other taxpayers face questions around the propriety or calculation of their payments. Below, we take a look at a few of the most frequently encountered hold ups or areas of concern and offer guidance on how to proceed.
Reasons for outstanding payments
There are a number of reasons why individuals or families have not yet received payments, but some of the less discussed causes relate to having a balance due paid by check or an overpayment applied to estimates. Even though a tax return was filed, if you do not have your direct deposit information on file with the IRS, your stimulus payment may be delayed. Taxpayers can check payment status and potentially update bank account information on the IRS website. The IRS announced the deadline for entering direct deposit information for non-filers or other circumstances ended at noon on May 13; however, if the portal is still accessible, it is worthwhile to submit the information.
Payments to deceased taxpayers
Deceased taxpayers are not eligible for a stimulus payments, even though some have been incorrectly issued by the IRS. The IRS recently released guidance on how to return these payments, which is outlined in #41 on the IRS list of stimulus payment FAQs. If the deceased taxpayer is survived by a joint filer, only the portion of the stimulus payment for the decedent must be returned. This amount will be $1,200 unless adjusted gross income exceeded $150,000.
If a bank account was used for tax refunds in 2018 or 2019 and then closed after death, the bank will reject any direct deposit from the IRS. This will trigger the IRS to switch to a paper check format.
Claiming an older dependent
In addition to the $1,200 (single) or $2,400 (married filing jointly) payments, the CARES Act also provided for an additional $500 for each child under the age of 17. Individuals age 18 and older will not receive a payment if they are claimed as a dependent by another taxpayer.
The IRS subsequently clarified that taxpayers who received a $500 payment for a 17-year-old dependent who turns 18 later this year will not have to repay it. However, questions remained about dependents older than 18 that are not yet fully established taxpayers in their own right, such as full-time college students. In these cases, the IRS confirms they may not be counted as part of the parent’s stimulus payment, nor will they receive a payment of their own.
Credits for new dependents
Taxpayers who welcome a child through birth or adoption in 2019 will be able to earn credit for the child’s stimulus benefit on their 2020 returns.
All stimulus payments received will be reconciled on the taxpayer’s 2020 income tax return, so any underpayments will be addressed at that time.
Responses to stimulus payment FAQs are published in the IRS Economic Impact Payment Information Center. RKL’s individual tax experts continue to monitor new guidance from the U.S. Treasury and are available to help with questions or repayment. Contact your RKL advisor or use the form below to submit questions, and be sure to visit the Coronavirus Resource Center for more insights.