IRS tells low-income parents they don’t have to wait until 2021 to get $500 stimulus payments

Many parents have been complaining that although they received their $1,200 stimulus payment as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (Cares) Act, the Internal Revenue Service failed to include the extra $500 promised for each dependent child under 17.

The distribution of stimulus payments has been plagued by glitches — including missing or incorrect payments for the dependent children of the most economically fragile Americans.

To get stimulus payments to people who aren’t required to file or who earn too little to file a tax return, the IRS created a special online non-filers tool to help process payments and collect information for dependent children.

Individuals receiving certain federal benefits — Social Security retirement benefits, survivor or disability benefits, or Railroad Retirement benefits — automatically received stimulus payments even if they didn’t file tax returns. But they had to go online and use the non-filers tool to claim the extra $500 they were owed for each dependent child.

In a controversial move, the IRS issued a special alert on its website on April 20 giving these federal beneficiaries about 48 hours to claim their $500 payments. If they missed that very short window, they would have to wait until next year when they filed a 2020 federal tax return to get the money. An additional deadline of May 5 was set for people who receive SSI or Veterans Affairs benefits.

Even after realizing thousands of these parents, some disabled themselves and caring for disabled children, didn’t make the deadlines, IRS Commissioner Charles Rettig said the agency couldn’t commit to sending out supplemental payments for eligible children.

Several parents living in Philadelphia filed a lawsuit against the Treasury Department and the IRS challenging the decision not to send payments to those who missed the two deadlines. Community Legal Services of Philadelphia, Villanova University’s Federal Tax Law Clinic and the Berger Montague law firm have teamed up to challenge the IRS’s refusal to send supplemental payments.

“When this ‘non-filer portal’ was launched, there was no indication that there was a deadline to use the form,” points out the lawsuit filed in the Eastern District of Pennsylvania. “Unsurprisingly, many non-filer federal benefits recipients with dependents … were not able to meet these tight deadlines. They did not learn of the IRS news releases in time; they encountered unresolvable technical issues with the portal; and their disabilities prevented them from using the portal without reasonable accommodations, which were not provided during the applicable windows to add dependents.”

But ahead of a hearing scheduled Monday, the IRS announced it was reversing its decision and will reopen the registration period for federal beneficiaries who didn’t receive the payments.

Starting Aug. 15 through Sept. 30, federal benefit recipients who didn’t file a tax return for 2018 or 2019 can use the non-filers tool to apply for the supplemental $500 payment for their qualifying children. The IRS said it expects the catch-up payments will be distributed by mid-October.

I’m really grateful that the IRS has taken this step,” said Jennifer Burdick, an attorney with Community Legal Services. “It addresses the issue of access to the portal to get supplement payments that was arbitrarily closed only for federal beneficiary recipients.”

Burdick said she was pleased people will get paid this year but still hopes the IRS can distribute payments before October. “I wish it was faster, but it’s so much better than spring 2021.”

No action is needed for Social Security, SSI, Veterans Affairs and Railroad Retirement Board beneficiaries who have already used the non-filers tool, the IRS said. Payments will automatically be made in October.

“This is a significant win for taxpayers,” said Nina Olson, a former taxpayer advocate who is now executive director of the Center for Taxpayer Rights. “These folks are among the most vulnerable among us, and the additional payments really help. It is baffling to me why it took the IRS so long to reach this decision. People can understand that programming needs to be done, but the IRS could have committed some time ago to do this, which would have relieved people’s anxiety.”

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