Changes made by another round of coronavirus relief legislation have led to different offset treatment for people receiving the aid as credits when they file their tax returns than for those who received the payments earlier, National Taxpayer Advocate Erin Collins said in a blog post. While that legislation exempted the second round of economic impact payments from offsets for debts including outstanding student loans, it didn't make that exemption available for people receiving recovery rebate credits when they file their taxes, according to the blog.
The legislation
, which passed at the end of 2020, also retroactively changed the Coronavirus Aid, Relief and Economic Security Act so that recovery rebate credits would be subject to certain offsets, Collins said. These changes mean that people who receive the funds when they file their 2020 tax returns will be treated differently than those who received them earlier in the year, she said.Tax refunds are sometimes subject to offsets for outstanding taxes, student loans or child support. But amid the economic devastation wrought by the pandemic, the Internal Revenue Service should automatically apply procedures that would allow people with debts to still receive their full economic impact payments, Collins said.
The relief legislation passed at the end of 2020 provided for one-time $600 payments for individuals, plus $600 for qualifying children. While the IRS deposited around 100 million payments using direct deposit as of Jan. 8 and another 8 million using prepaid debit cards, some people have to claim the funds on their 2020 tax returns.
Research from the Urban Institute on the agency's distribution of the first round of economic impact payments, which were authorized by the CARES Act, found that people at or below the poverty line who lacked consistent internet access or were unbanked were less likely to receive the payments than wealthier people.
--Editing by Vincent Sherry.
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