TPC holds a webinar today on the tax provisions of the CARES Act. The far-reaching Coronavirus Aid, Relief, and Economic Security (CARES) Act includes direct cash payments to individuals, changes to the charitable deduction, and tax assistance to business that are losing money in the pandemic. Today from 1:30 pm to 3:00 pm, tax policy experts, including IRS officials, will assess the law. What challenges does the IRS face in delivering recovery rebates? How will the CARES Act affect charitable deductions? How will businesses respond to corporate tax changes? Register for the Zoom event here.

About that follow-up relief bill. Barely two weeks after passing a massive $2 trillion coronavirus relief bill, Congress already is tangled up in the next bill. Senate Majority Leader Mitch McConnell and House Minority Leader Kevin McCarthy want it only to increase aid to small businesses by $250 billion. But Democrats want much more, including added aid to hospitals and state and local governments. And some Republicans want more too. Talks continue this week. 

IRS says it direct-deposited the first round of CARES “economic impact payments” over the weekend. Those payments went to some of those who filed tax returns for 2018 or 2019 and whose refunds were direct deposited. If the IRS does not have your bank account information, you may have to wait for weeks or months for the payment.   

Can some people get a larger payment by waiting to file their 2019 tax return? TPC’s Janet Holtzblatt details how some could game the payment. Since the IRS is using tax year 2018 or 2019 returns, someone whose income exceeded the $75,000 income phase-out for a full payment in 2019, but not 2018 could get a full $1,200 payment simply by slow-walking their 2019 return. How long should they wait? That depends on when the IRS sets its “time of determination” to decide which return to use.   

For non-filers: The IRS releases its simple tax return for recovery rebates. People who don’t usually file tax returns but want their recovery rebate can fill out the new form online. Tax experts recommend that people who receive Supplemental Security Income also complete the form. Who does not need to use the new form? People who already filed a tax return for 2018 or 2019 and people who receive Social Security retirement, disability, or Railroad Retirement benefits. 

The IRS has reduced operations. The agency sent staff home and closed facilities across the country due to the pandemic. This includes centers that process paper returns and forms, and walk-in centers where tax payers can get advice. The IRS workload is heavier than ever, with an extended tax season and CARES rebate processing. 

The CARES Act increases charitable deductions without helping nonprofits very much. TPC’s Howard Gleckman argues that the law may help some nonprofits including hospitals—frequent recipients of large gifts from wealthy donors. But “for the most part,” Howard concludes, “the CARES Act [was] a missed opportunity to improve the charitable deduction. [It] will do little to increase giving to non-profits in the long run.”

Unemployment benefits under the CARES Act will cost more than Congress projected—and that’s okay. Congress projected those benefits would cost about $260 billion. But that was before the nation’s unprecedented spike in layoffs, and it likely underestimated unemployment insurance (UI) costs—by a lot. TPC’s Ben Page explains that “a highly desirable feature of the UI program is that it expands automatically if the economic picture is more dire than anticipated.” That’s different from the rebate payments that are fixed regardless of economic conditions and “not as well targeted to those impacted by the pandemic and associated economic contraction as the UI expansion.”

Congress is not in session.The Daily Deduction will post Mondays until it returns. 

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