To its credit, the IRS has been quickly distributing the first tranche of rebates authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. But the lowest-income families may be among the last to receive them for two reasons. First, because many of these families have not filed federal income tax returns for 2018 or 2019. Second, because even those who have filed a tax return may not have a bank account to which a direct deposit can be made. And even as we think about getting that much-needed first round of funds to lower-income households, Congress should consider the structure of a second round.
The first payments have already been distributed to about 80 million filers. This cash is critical to those financially suffering the most in the pandemic. For those who haven’t filed income tax returns and who don’t receive Social Security or Supplemental Security Income benefits, the IRS has set up a FreeFile tool to let the IRS know where to send the payment without the filing of a formal income tax return. The IRS has a similar portal for those who have not provided bank account numbers to IRS with their income tax returns, so they can provide the agency their direct deposit information.
Already, House Democratic leaders are calling for additional relief. The CARES rebates—$1,200 for an individual ($2,400 if married) plus $500 for each child under 17—won’t be enough to stabilize the financial situation for all who are hurting as the economy faces a sustained slow-down.
Even before the current pandemic, about 60 percent of adults in families with children who live on incomes below two times the poverty line reported trouble securing housing, utilities, food, or health care. For a family of four, two times the poverty line is about $50,000. Nearly one-quarter of all families with young children reported problems paying household and other regular bills such as their rent or mortgage, or missed a credit card payment.
The best way government can help with these diverse needs is with cash.
The CARES Act payments certainly will help, but a long list of low-income households may have to wait for the money because they have not filed a tax return. This group includes people with income below the filing threshold (particularly those without children who lack other incentives to file a return) and people who rely solely on veteran’s benefits, who can’t automatically get rebates. (New yesterday, people who rely solely on Supplemental Security Income do qualify for automatic payments.) Others who may have to wait for a rebate payment include taxpayers who received a refund anticipation loan in past years. In some cases, their entire refund was deposited into their lender’s account rather than split between a lender’s account and a personal account. If personal account information was not given to the IRS, these people will be among those getting a paper check. One such service has already announced that their clients should expect their rebate payment in the form of the (slower) paper checks.
Individuals who don’t provide updated direct deposit information to the IRS will be getting paper checks, but it may take many weeks or months. IRS reports that it can issue about 5 million paper checks each week, starting next week.
If Congress does authorize a second round of payments, presumably they could go out much faster. To begin with, the IRS would have direct deposit information for a greater number of households. And people who were scheduled to receive paper checks in the first round might be encouraged to provide direct deposit information when possible.
More cash payments could complement other efforts targeted to those hit hard economically by the pandemic. These other efforts might include a further extension of unemployment benefits or increasing the size of regular SNAP (food stamp) payments to reduce food insecurity. Cash could fill in remaining gaps, including costs of health care, rent, or caregiving.
The IRS response to the CARES Act has been impressive, and the rebate payments will assist many people. But non-filers remain a concern. And it’s not too early to start thinking about how the next round of legislation could best provide an additional cash boost to help people until they are able to get back to work.
