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IRS Guidance on Stimulus Payments Contradicts CARES Act, Senators Warn

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Democratic lawmakers are pressing the Internal Revenue Service to correct guidance it issued Monday stating that Social Security beneficiaries would need to file tax returns in order to receive direct cash assistance payments under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

In a letter sent Wednesday to Treasury Secretary Steven Mnuchin and Social Security Commissioner Andrew Saul, Sens. Maggie Hassan, D-N.H., and Sherrod Brown, D-Ohio, and 39 other senators told the IRS that its guidance contradicts the CARES Act’s treatment of vulnerable individuals in receiving direct stimulus checks.

The IRS guidance indicates that the agency “may require recipients of Social Security retirement and disability benefits to file 2019 tax returns to receive stimulus payments,” the lawmakers wrote.

This filing requirement, the lawmakers said, “would place a significant burden on retired seniors and individuals who experience disabilities, especially given the current unavailability of tax filing assistance from Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs during the COVID-19 crisis.”

Many Social Security recipients who do not have any other income do not file tax returns.

To ensure that these vulnerable individuals automatically receive stimulus payments, the CARES Act “explicitly provides the Treasury Department with the authority to provide payments to seniors receiving Social Security retirement benefits and to individuals receiving Social Security disability benefits, even if these individuals do not file tax returns,” the letter states.

The IRS will automatically send stimulus payments to eligible taxpayers who filed a 2018 or 2019 tax return.

Along with colleagues on the House Ways and Means Committee, “we strongly urge you to ensure that economic stimulus payments are automatically sent to vulnerable seniors and individuals who experience disabilities, without these individuals needing to file a tax return,” the senators wrote.

Unemployment Benefits

In a separate letter to Labor Secretary Eugene Scalia sent the same day, Senate Minority Leader Chuck Schumer, D-N.Y., along with Sens. Ron Wyden, D-Ore., and Bernie Sanders, I-Vt., urged Scalia “to do everything” within Labor’s power to help states “rapidly disburse” unemployment benefits to millions of Americans in desperate financial need.

“Due to a record-breaking 3.3 million Americans filing for unemployment benefits last week in the economic fallout of the coronavirus pandemic, there are increasing reports of jammed phone lines and crashed websites at unemployment offices across the country,” the senators wrote in their joint letter.

The law supplements every state’s unemployment benefits by $600 a week for each recipient, while expanding eligibility to self-employed, gig workers, independent contractors and workers with irregular work histories.

The senators asked Scalia to answer several questions by Friday, including to detail Labor’s plans to ensure that eligible Americans can quickly apply for expanded unemployment benefits, have their applications processed and receive checks.

Also, the senators want to know how Labor is supporting states in their efforts to send checks and whether the department is hiring more staffers to handle the increased workload as quickly as possible.

— Check out Treasury’s Mnuchin Vows to Boost Small-Business Loan Pool Under CARES Act on ThinkAdvisor.