June 16, 2020
This is the first in a series of posts about delivery of the CARES Act Economic Impact Payments, a.k.a. stimulus checks. Subsequent posts will highlight the stories of affected individuals, data requests for the IRS, critical policy fixes that must be implemented immediately, and longer-term tax code program reforms inspired by efforts during this crisis.
In early April, shortly after Congress appropriated economic impact payments (EIPs, a.k.a. stimulus checks) to the vast majority of American households in the CARES Act, we published an article warning of possible widespread challenges in delivering the funds, especially to the most vulnerable Americans.
To its credit, the IRS quickly took several key steps that addressed many of these concerns. The agency launched two new online tools helping families register their payment information, and automated payments to many of those most in need. All told, the IRS has already paid the lion's share of benefits in two months. But, for millions of vulnerable Americans who need the funds most, these relief payments remain as elusive as ever. And, for millions more, mistakes in the program’s rollout have made other critical tax credits aimed at low-income Americans— like the Earned Income Tax Credit and Child Tax Credit — impossible to access.
We know this from talking to service providers and low-income taxpayer clinics (LITC), from careful research of IRS processes, and from our survey of 83 provider organizations, asking what issues they have encountered during the rollout. (Survey details)
We are relying on these heuristic data sources because official statistics are unavailable. The IRS has released only total payments by state, without clarifying who has and has not received payments or how many remain unpaid. Meanwhile, the Census Bureau launched the Household Pulse Survey to provide up-to-date data during the COVID-19 crisis, which was designed to include EIP questions, but the questions were dropped from the survey for at least a month at the request of the Office of Management and Budget. Over two months after the program was launched, we have only incomplete data on the EIPs. (More details on these data issues are forthcoming in a future post.)
For now, here is what we know:
1) Stimulus check delivery issues are relatively common.
The median organization responding to our survey reported they had seen 21-40 instances of households having difficulty accessing the EIP. 17% of organizations had seen over 75 such cases. Meanwhile, a survey of food stamp recipients fielded in late May by Propel found that 31% had not yet received their stimulus check. If the rollout were broadly and universally successful, local organizations may have each seen a small handful of delivery issues. The fact that most organizations have seen at least dozens is not consistent with an entirely smooth process.
2) Households who do not file taxes and do not receive SSA or VA benefits — about 10 million in total — are still struggling to access the payments.
Because the EIPs are paid primarily based on 2018 or 2019 tax returns, households who do not file taxes — the vast majority of whom earn too little to file — were always at the highest risk of being left out. To serve these households, the IRS created a tool which allowed non-filing households to register for the payment without filing a traditional tax return. But our survey shows that this tool — often referred to as the “non-filer portal” — has not been entirely successful. Asked about non-filers who used the portal, the overwhelming majority of organizations reported that they knew of at least a few users who had not yet received their payment, and about a quarter reported that users not receiving payments was a widespread issue. Meanwhile, the vast majority of organizations reported that at least some non-filers were having difficulty actually using the portal (due to limited internet access, or difficulty completing identity verification), with again about a quarter reporting this issue was widespread.
Qualitatively, and consistent with these results, providers consistently wrote that the most marginalized populations are having the most difficulty using and getting paid via the portal. People experiencing homelessness are especially unlikely to have received a payment.
3) The IRS’s EIP registration tool for non-filers blocks users from later filing a complete 2019 tax return, which blocks them from claiming the often larger earned income tax credit (EITC) and other credits.
While the IRS has never clearly confirmed it, all evidence suggests that the non-filer portal actually files a lightweight 2019 tax return on behalf of its users. As a result, when portal users attempt to efile a 2019 return, they cannot do so. (The IRS blocks efiling of a second return from the same person in a given year to prevent identity theft.) Traditionally, in this context, taxpayers can file a superseding return on paper. But the IRS is not currently processing paper returns and has given no clear notice on when they will resume doing so. As a result, portal users — likely in the millions — have no way to file 2019 taxes and claim credits for which they are eligible. We call this the “filing trap.”
For many households, this is no trivial concern: These households now have no way to claim thousands of dollars in EITC that they deserve. So, in seeking to access the EIP, these households unknowingly sacrificed their — often much larger — EITC payment. A single mother of three earning $11,500 would have received $2,700 in EIP, but would have been eligible for $5,186 in EITC; $5,186 she now cannot claim as she is in the filing trap.
The IRS has neither acknowledged this issue nor proposed a solution for affected families.
4) The IRS’s automatic payment process for SSA and VA beneficiaries left some behind.
The IRS claims to have automatically paid EIPs to all Social Security (old-age, disability, and survivors) beneficiaries, Supplemental Security Income (SSI) beneficiaries, and VA disability compensation and pension beneficiaries. Our survey, however, shows widespread reports of beneficiaries who slipped through the cracks:
Well over half of organizations claimed that they have seen “a few” or “many” cases in which Social Security and SSI recipients had not received their payments. The number is lower for VA beneficiaries, though this may be because veterans often receive services from veteran-specific service organizations, who may have been under-represented in our sample.
The IRS has not explained how or why these beneficiaries could have been left out of an allegedly automatic process.
5) Non-claiming of dependents is somewhat widespread
SSA and VA beneficiaries who do not file taxes were supposed to be automatically paid the $1,200 payment available to adults. These beneficiaries were also eligible for an additional $500 payment per dependent child, and were required to use the non-filer portal to claim any children. But the IRS provided extremely short windows in which to claim them. For Social Security beneficiaries, the IRS issued an alert on April 20 that the deadline to register dependents would be April 22. (This followed a little-reported announcement on April 15 — further details here.) For SSI and VA beneficiaries (whose automatic receipt of EIPs was announced on April 15 and 17, respectively), the May 5 deadline appears to have been initially announced on April 25, but did not get widespread attention until several days later.
(Note that this is related to but separate from another critical issue, in which the IRS mistakenly did not pay $500 supplements to 450,000 beneficiaries who did claim dependents on time. The IRS has already pledged to address this issue in July.)
About a third of organizations reported hearing of cases in which beneficiaries eligible for the additional payments missed the claiming deadline.
The IRS has announced that there is no 2020 fix for this issue; anyone who did not claim their dependents in time will get the extra $500 in 2021.
The stimulus check rollout has not been without success. The IRS deserves credit for taking powerful steps that have facilitated access to funds for millions of Americans — and, indeed, several of these steps are best practices we believe should be expanded in the future. But, we must not let these successes blind us to the reality that, for many of those who need the money most, getting a check has been difficult at best.
Over the next few weeks, we will be releasing more detailed policy fixes that the IRS should implement to ensure critical funds reach vulnerable Americans — as well as longer-term reforms inspired by the bold measures of the last several months.
Updated at 12:25 p.m. on June 25: This article was updated with new information from the GAO regarding the fact that 450,000 beneficiaries indeed did claim dependents correctly in advance of the deadline and did not receive $500 payments due to an error. The IRS has pledged to address this issue in July. No further information is available regarding those who did miss the deadline.