The Treasury Department now says that Americans on Social Security will not be required to file a "simple tax return" to receive a stimulus check from the U.S. government. The announcement reversed an earlier statement from the Internal Revenue Service that participants in the federal retirement program would need to file such a return to get the funds.
The IRS directive would have impacted about 15 million people, including millions of seniors on Social Security, who aren't required to file tax returns, according to Chuck Marr, senior director of federal tax policy for the Center on Budget and Policy Priorities. Seniors who rely on Social Security for their sole source of income don't have to file tax returns.
The Treasury's reversal comes after lawmakers including Senators Maggie Hassan of New Hampshire and Sherrod Brown of Ohio, both Democrats, expressed alarm over the guidance, saying in a letter on Wednesday to the IRS and Treasury that it will "place a significant burden on retired seniors and individuals who experience disabilities."
The lawmakers had urged the IRS and Treasury to make sure the payments "are automatically sent to vulnerable seniors" and disabled Americans without them needing to file a tax return, especially given that the IRS's Volunteer Income Tax Assistance and Tax Counseling for the Elderly program has been closed due to the coronavirus.
Many Americans are counting on the stimulus checks to help them stay afloat financially during the coronavirus pandemic. The payments amount to $1,200 for individuals who earn less than $75,000 per year and $500 per child younger than 17. The IRS will use the information from Social Security statements to send the $1,200 checks to Social Security recipients who did not file tax returns in 2018 or 2019, Treasury said late Wednesday.
"Social Security recipients who are not typically required to file a tax return need to take no action, and will receive their payment directly to their bank account," Treasury Secretary Steven Mnuchin said in the statement.
The IRS's guidance on Monday sought to provide more details about what Americans need to know about receiving a government check to help ease the massive blow from the virus on the economy, but also created concern and confusion with its statement that some seniors would have to file the "simple tax return."
In the earlier guidance, the tax agency noted that people who don't typically file a tax return "will need to file a simple tax return" to get their check, which impacts millions of seniors, low-income taxpayers, some veterans and individuals with disabilities. The simple tax form would ask for a person's filing status, number of dependents and direct-deposit bank account information, the IRS said on Monday.
That raised questions about whether seniors who failed to file a simple tax return would forfeit their stimulus checks or face delays or other issues. On social media, some consumers expressed confusion over the requirement. The Treasury department earlier on Wednesday had told CBS MoneyWatch that it was examining whether seniors who didn't file the simple tax return would still receive stimulus checks, and that it hoped to provide more guidance.
Most Americans don't need to do anything to receive a check, given that the IRS is relying on 2018 and 2019 tax returns to find household income — which determines the amount of an individual's stimulus check — and direct deposit information for bank accounts.
Lessons from 2008
The requirement to file a new return could have caused millions of seniors to miss out on stimulus payments, based on what happened in 2008 when the government issued stimulus checks to help offset the damage households suffered during the Great Recession. At the time, lawmakers required millions of people who don't typically file tax returns, including some seniors and veterans, to file annual returns.
But about 3.5 million of those Americans didn't file the required returns and lost out on the stimulus payments, Marr noted in a post.