Another reason some people have been surprised that they did not receive an economic impact
payment, or the full amount they expected, is that either the Treasury Department or the bank held it
back. Under the CARES Act, payments can be reduced if the taxpayer owes child support. In addition,
some banks—unless prohibited by state or local law—used the payments to offset amounts overdrawn
by the account holder or to transfer the payments to a third party in response to a garnishment order.
The pandemic also led to delays. By April, the IRS had shut down all its service centers and sent
most of its employees home to work remotely. Certain tasks, though, could not be done from home, and
those included opening mail and processing paper tax returns (including many that had been received
before the shutdown). As a result, the economic impact payments were delayed for many people who
did not file their 2019 tax return electronically and who had not received a direct deposit of
overwithheld taxes or a refundable tax credit based on their 2018 return. The affected filers will not get
their economic impact payments until their paper returns for 2019 are processed, but as of June 1,
2020, employees in only three states (Kentucky, Texas, and Utah) were required to return to IRS
facilities.
Delay of Payments to Nonfilers
Getting the advance payment to people who did not file income tax returns for 2018 or 2019 is
probably the IRS’s biggest challenge. That challenge will persist—and perhaps intensify—next year when
nonfilers who have not yet received the payment will be able to receive the economic impact payment
only if they file a tax return for 2020.
People are not required to file an income tax return if their income in 2019 was under $12,200 (if
single) or $24,400 (if married filing jointly). Those thresholds were slightly higher for people 65 and
older. Even so, many very low–income people still file an income tax return, generally to receive a
refund of income taxes that were withheld by their employer during the year or to claim a refundable
tax credit such as the earned income tax credit. But that still leaves a sizable number of people who do
not file—including people who do not work and thus are not eligible for the earned income tax credit or
the refundable portion of the child tax credit (the “additional child tax credit”).
The CARES Act addresses this challenge to some extent. Because the IRS already receives benefit
information (Form 1099s) from the Social Security Administration and Railroad Retirement Board every
year, the IRS could identify recipients of Social Security and Railroad Retirement Social Security
Equivalent benefits and determine which ones did not file income tax returns and automatically sent the
economic impact payment. In mid-April, the IRS obtained comparable data about beneficiaries of
Supplemental Security Income (SSI) and veterans compensation and pension benefits and was able to
repeat the process for beneficiaries of those two programs.
Still, the IRS lacked sufficient information to send advance payments automatically to other
nonfilers—an estimated 12 million people, according to the Center on Budget and Policy Priorities
(Marr et al. 2020). Those with access to a computer can apply for the advance payment on the IRS