Virus Payments May Take Months, Not Weeks, to Hit Bank Accounts

Treasury Secretary Steven Mnuchin says he wants direct payments to households to go out within three weeks of Congress passing a stimulus law, yet former IRS officials say those payments could take months to reach households.

Lawmakers on Capitol Hill are formulating legislation that will more than likely include some form of stimulus payments to American households. Congressional leaders are trying to figure out how to target those payments and quickly distribute them to taxpayers.

Even the simplest plan could take the Internal Revenue Service a month or two to enact because there isn’t a centralized, up-to-date list of every household, number of children, income and address or direct deposit bank information, the former officials said. The most recent times the IRS sent stimulus checks to large swaths of households — in 2008 and 2009 — it took more than two months to get the money in the mail.

Some taxpayers, such as Social Security recipients and those who get benefits from the Department of Veterans Affairs, will be easy for the IRS to send money to, because the federal government already sends funds to those individuals regularly.

“For the vast majority of individuals, the IRS has to figure out how to put households together and then figure out a way to get money to them,” said Mark Mazur, a former IRS and Treasury official. “The idea that IRS has this all-knowing view of what your family looks like is just not true.”

IRS officials didn’t respond to a request for comment on how long the agency projects it would take to issue the payments.

IRS Data

Mnuchin has touted a plan that would send $1,000 to every adult and $500 to every child. Senate Republicans released a proposal on Thursday that would give $1,200 to many adults and $500 to children, but the payments would be as low as $600 for some low-income workers and would phase out completely for individuals who make at least $99,000.

The IRS has data on taxpayers’ addresses and bank accounts for those who received a refund via direct deposit, but it might not be current or accurate, particularly for those who haven’t yet filed their taxes this year. The Senate plan would rely on income data for 2018, so some information is bound to be out of date.

The birth of children, divorces and marriages could also affect how big the check should be, meaning that many people could receive more or less that what they’re supposed to get.

“You have to accept there is going to be some percentage of errors,” said Jamie Wickett, a partner at the law firm Hogan Lovells who was involved with a commission to restructure the IRS. In addition, “there is always some fraud. You want to do this as quickly and simply as possible.”

Senate Republicans on Friday began negotiations on their proposal with Democrats. The plan would need support from some Democrats to pass the Senate, and would then have to pass the Democratic-controlled House. The complexity of the legislation and how long it takes Congress to pass it will also greatly affect how quickly the IRS can respond.

Rebates in 2008

There will likely be some recourse for taxpayers who get shortchanged or don’t get a check at all, but they’ll probably have to wait for it. In the 2008 rebate checks, taxpayers who believed they didn’t receive all they were due could claim the additional amount on their tax return. That would mean taxpayers could get the money, but they’d need to wait until the 2021 tax filing season.

Administering a major stimulus program could come during the IRS’s busy annual tax filing season; the IRS has extended the deadline to July 15.

The agency has already begun paring back some on-site staff and may have to curb employee levels more if workers are getting sick from the fast-spreading Covid-19.

“I am concerned about the stress on the workforce,” said Mark Everson, IRS commissioner from 2003 to 2007. “You have a lot of employees who are older and retirement-eligible. They may have aging parents themselves at home.”

The 2008 stimulus checks, which also were sent during the tax filing season, created major complications for the IRS, according to a report from the Government Accountability Office.

Calls to IRS more than doubled as many taxpayers had questions about the amount of their stimulus payment or its timing. The IRS had to shift staff away from collection activities to answer the phones. In total, it cost the IRS about $960 million to administer the stimulus, according to the GAO.

“It’s a heavy lift for the service. It’s a very compressed time frame that requires a lot of assumptions on their part,” said Everson, now a vice chairman at Alliantgroup. “It’s important to get this right. It’s got to launch successfully even if it launches a little bit late.”

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