Business

Your stimulus check might be delayed if you filed your taxes with an online tax preparer

Written by Administrator


Stimulus checks may be delayed for some customers, the IRS and major tax prep software companies warned this week.

The lag could affect as many as 14 million people, a banking industry source told NBC News.

The second round of economic impact payments, which provide for $600 per adult and qualifying dependent child, started going out at the end of December.

“These payments may begin to arrive in some accounts by direct deposit as early as tonight and will continue into next week,” Treasury Secretary Steven Mnuchin tweeted on Dec. 29.

Millions of taxpayers with active direct deposit information on file with the IRS started receiving theirs in the first few days.

But when some filers went to the IRS “Get My Payment” tracker to check on their relief aid, they were surprised to see a different bank account number listed as their own — and no money in their own bank account.

A similar issue cropped up with the first round of stimulus payments in April. Some taxpayers who use “Refund Transfer” services that allow them to pay their tax preparer out of their tax refund itself, an appealing option for struggling filers, also had their payments delayed due to an administrative quirk.

In order for the refund transfer to work, the preparer creates a temporary bank account to receive the refund, takes their cut, then passes on the rest to the filer, and closes the account. But the IRS used the closed bank account on file, leaving some funds in limbo.

“People who need money now… may have to wait months.”

Depending on the situation, some of these customers will still get their funds automatically direct deposited to their bank account or reloadable pre-paid debit card.

However, others could face further delays, possibly receiving a paper check, or only receiving their stimulus payment in the form of a credit on their 2020 taxes — next year.

“In some cases, money was sent to a different account than the first stimulus payment last spring,” tax preparation company H&R Block said in a statement emailed to NBC News.

On Tuesday evening, the IRS updated its guidance and said if the tracking site “reflects a direct deposit date and partial account information, then your payment is deposited there.”

If the site lists the date a payment was mailed, it may take up to four weeks and consumers should “watch your mail carefully for a check or debit card.”

But if the tracker says “Payment Status #2 – Not Available” then filers’ only option is to claim a tax credit. That is done by completing line 30 of the 2020 Form 1040 or 1040-SR.

“The IRS Get My Payment website may display an account number you don’t recognize. If you took a Refund Transfer, it may be reflecting that account number,” H&R Block tweeted on Monday. “But don’t worry — we have sent these payments on to the method you chose for Refund Transfer: direct deposit, check or Emerald Card. The money should be there by the end of the day.”

Ashley McMahon, spokesperson for tax preparation company TurboTax, said in an email the IRS has the banking information necessary for all customers and the agency “is the sole party with the ability to determine eligibility and distribute stimulus payments.”

Neither the IRS nor the Treasury Department responded to an NBC News request for comment.

“Because of the speed at which IRS issued this second round of payments, some payments may have been sent to an account that may be closed or no longer active,” the agency wrote in an online FAQ.

It also acknowledged that some of the payments may “bounce” back to the agency.

“By law, the financial institution must return the payment to the IRS, they cannot hold and issue the payment to an individual when the account is no longer active.”

The issue has even affected tax prep customers who had no issue receiving their first check.

Unlike the first round, tax preparers are giving the IRS a list of their closed customer accounts and telling the agency to update accounts on the government end, the banking industry source said.

The IRS has a Jan. 15 deadline to send out the checks, according to the legislation, which means if filers don’t get their payment automatically or by paper check by that time, they may only be able to get their stimulus in the form of a tax refund credit.

“It is disappointing that the IRS did not fix this problem, which it has known about for months, in light of the likelihood of a new round of stimulus payments,” National Consumer Law Center attorney Lauren Saunders said in an email to NBC News. “People who need money now may have to wait months until they can file a tax return and get their refund, unless the tax prep companies are able to forward the funds.”

That’s not soon enough for millions of Americans who were banking on having much-needed relief payments this week.

“This has been deeply frustrating as I have two kids and I am pregnant,” Tiffanie Perez, 27, of Brooklyn, New York, said in an online message. “This was supposed to give us a little boost and get food and bills paid. My husband literally just started working on Monday and unemployment ended for him.”

Perez said the IRS told her there was a “glitch” and she should wait two weeks to see if she receives a direct deposit, a paper check, or a letter informing her of the situation. If she gets nothing, her only option will be to claim it on her taxes.

“Many friends are so far behind on rent or skipped Christmas. This money was supposed to help a little and now it’s not coming for who knows how long.”

Sara F., 31, from St. Louis, Missouri, who asked that her last name be withheld for privacy reasons, had been counting on the stimulus payment to help catch up on bills after complications from a possible coronavirus case forced her to leave work, leaving her and her partner reliant on a single income. Most days she can’t get out of bed, but the past few days have been spent calling the IRS and TurboTax, she said.

Because she paid for her tax prep out of the tax refund, the stimulus payment went to the closed account and has now bounced.

“They said the bank rejected the money and sent it back to the IRS. The IRS said it may issue paper checks within three weeks once the money is officially returned,” Sara told NBC News. “If not we would have to trace the money — which, due to backlog, could take from six weeks to six months.

“Many friends are so far behind on rent or skipped Christmas. This money was supposed to help a little and now it’s not coming for who knows how long,” she said.

Consumer watchdogs blasted the red tape hampering the relief payments.

“At a time when every dollar counts to get food on the table, people simply can’t afford to wade through bureaucracy or wait for a paper check,” Lisa Gilbert, executive vice president at consumer advocacy group Public Citizen, said in an email.




Source link

About the author

Administrator