Virus Payments Hit Glitches as IRS Sends Billions to Americans

(Bloomberg) -- Errors are turning up in the Internal Revenue Service’s $1,200 payments to households this week, with some people receiving too little, a handful getting more than expected and some seeing their payment go into an unrecognizable bank account.

Many of the millions of people expecting the payments are struggling with an IRS “Get My Payment” webpage intended to give the status of their funds. Several users said on Twitter their payment information is unavailable, even though they should qualify for the money. Some said the IRS deposited the money into a bank account that isn’t theirs.

Duncan Daniels, 36, of Milwaukee said in an interview that the IRS website shows his correct Citibank account number and that the money was deposited there on April 15. But the money hasn’t appeared in his account and there isn’t a pending transaction. When he called Citibank, employees said they didn’t see any trace of the funds, Daniels said.

The Treasury Department said it is aware of the issues and working to address them. The department has rushed to process 80 million payments in three weeks -- about half of the 150 million to 170 million direct deposits and checks being sent to Americans as part of the $2.2 trillion coronavirus package passed in late March.

The IRS has directed users of its webpage to keep trying daily to learn the status of the payment. But the solution is less clear for those who say their funds went into a bank account they don’t recognize.

“The IRS deserves high grades for pulling this off at this stage,” said Mark Everson, a former IRS commissioner. “But now they have to be extremely careful to make sure security protocols are correct.”

Wrong Account

It’s not clear how widespread the glitches are or whether the cause lies with problems at the IRS or with the end users or their banks. And the situation isn’t new -- the IRS has an online form for taxpayers whose annual refunds have been sent to the wrong account.

Still, taxpayers are going to get anxious if they don’t see their payments, which puts them more at risk of falling victim to scammers, said Everson, now a vice chairman of tax advisory firm AlliantGroup LP.

The IRS says that if a payment goes to a closed account, the bank will reject the deposit and the IRS will send the person a check in the mail. The IRS says it will start mailing payments on April 20 and can process about 5 million checks a week.

People whose payment went astray will be notified where it was sent and given instructions for reporting problems in receiving the money. But those notices won’t arrive until about two weeks after the payment was scheduled to appear.

Tax Preparers

Taxpayers who previously got advance tax refunds from a tax preparer, such as Intuit Inc.’s TurboTax, Jackson Hewitt or H&R Block Inc., could also face delays. The bank account on file may be reported as closed because it’s a temporary account associated with the tax preparer or lender, National Taxpayer Advocate Erin Collins said in a blog post.

Those taxpayers will get their checks sent to a personal account, if possible, or will get a check in the mail. That could also explain some of the unrecognizable account numbers some taxpayers are seeing.

Some of the millions who have received payments are seeing less than anticipated after the bank garnished some or all of the payment. The law bars the government from garnishing payments if individuals owe back taxes, but it didn’t say whether banks could seize payments to cover other debts their customer owes.

Five banking groups said in a letter to Congress that absent a law change or guidance from Treasury, they are required to enforce court-ordered garnishment to pay creditors.

Some banks say they won’t seize assets for late fees or below-zero account balances. USAA said in a statement Thursday that it will pause collecting against negative account balances after it had initially garnished some stimulus payments from their account holders. Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. said they’re working to ensure that checking-account customers with negative balances still get their full stimulus payments.

Higher State Levies

People in Alabama, Iowa, Louisiana, Missouri, Montana, and Oregon, could face a state tax bill next year on some of their stimulus payment, because of laws that increase state tax liability as federal tax bills are decreased. If people end up being eligible for a bigger payment than the IRS initially sent, because of a change in family size or job change, the state could tax that portion, said Jared Walczak, director of state tax policy at the Tax Foundation.

Additionally, others including international students and relatives of people who died are getting payments they didn’t expect. The IRS is relying on tax return data as old as 2018 in some cases.

The IRS hasn’t specifically said whether the funds will need to be repaid in either instance, but generally the agency has said payments sent in error won’t need to be returned to the IRS.

Still, public policy experts are worried that bureaucracy, a lack of awareness and lack of access to technology will prevent many people from getting their payments.

The IRS has said recipients of Social Security and Supplemental Security Income won’t have to do anything to receive their funds. But if they have dependent children, they must submit information to the agency to get the $500 per child they are owed. Additionally, some people receiving veterans benefits will need to submit their information to the IRS.

The “biggest concern” is that people who don’t normally communicate with the IRS will need to take extra steps to get full payments, said Thomas J. Giordano Jr., who heads the Social Security disability practice at law firm Pond Lehocky. He said that’s particularly hard because public libraries and other places that offer access to computers are closed.

“You’re talking about the most underprivileged portion of our populace,” he said.

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