Can your tax preparer get your stimulus check?
Where are stimulus checks going?
A tax preparation consultant in the Washington, D.C., area, has been inundated with calls and emails from clients wondering what happened to their payout.
“I had to investigate,”
We discovered that the unrecognized digits people found listed on the portal were linked to refund transfers accounts, often created on behalf of taxpayers who want preparation fees taken out of refunds so they don’t have to pay preparers upfront.
“Those last four digits on the Get My Payment portal match the transfer provider’s information that has been submitted to the IRS,”
After you file your taxes with a tax professional, transfer banks such as MetaBank, Republic Bank and Santa Barbara Tax Product Group set up temporary accounts for taxpayers who want a refund advance or to deduct tax preparation fees from a refund.
That account number and the bank’s routing number are sent off with the tax return to the IRS.
The IRS deposited some stimulus checks into these temporary accounts, according to MetaBank. “The IRS has not explained to us why this error occurred,” MetaBanks said in a statement.
How Will I Get My CARES Stimulus Payment if my Preparer Paid My Refund?
The IRS also noted that a due to a reporting error the “Where’s My Payment” app sometimes stated that rejected payments were going to the same account a second time. According to the IRS, these payments were in fact to be mailed as checks and not re-sent to the closed account.
If you experienced this issue and were not aware that your refund was paid through your preparer, you may reconsider your choice of preparers in the future. IRS and banking rules require clear disclosure of the use of these products and any associated fees. For many taxpayers, IRS FreeFile, available through the IRS website allows you to file without the fees associated with commercial preparers.
As most Americans know by now, the CARES Act instructs the IRS to send every non-dependent with a social security number a payment of $1,200 for an individual ($2,400 for a married couple), with an additional $500 for each child. The payments phase out for people with income over $75,000 for an individual or $150,000 for a married couple.
In order to get the money to you as soon as possible, the IRS will direct deposit the stimulus payment if the IRS knows your bank account. The IRS will rely on the bank account information reported on a taxpayer’s 2018 or 2019 income tax return in order to quickly deliver the checks to intended recipients. For taxpayers who have not yet filed an income tax return for 2019 or for whom the filed 2019 return has not yet been processed, the IRS will use the information from the 2018 tax return, if filed.
The IRS is rolling out a “Get My Payment” application for taxpayers to enter direct deposit information if it’s not already on file, but reportedly this app cannot be used to update existing bank account information. The IRS’s description of Get Your Payment states that it will allow taxpayers who have not provided direct deposit information to provide bank information, but does not indicate that it will allow taxpayers to change information the IRS already has on file.
Consumers beware
“The IRS has not announced how it will send the stimulus payment to taxpayers who selected [refund] bank products during their most recent tax filing,”. “We are directing clients to Get My Payment to find their payment status, type and whether the IRS needs more information, including bank account information.”
A spokeswoman for Online service has all the bank account information for its customers who received tax refunds electronically.
“They have created confusion by not always using clients’ final destination bank account information for stimulus payments,”, a spokeswoman for the company. “We share our clients’ frustration that many of them have not yet received these much-needed payments due to IRS decisions, and we are actively working with the IRS to get stimulus payments sent directly to client accounts.”
The issue does highlight the need for more consumer awareness before taking these refund deals, which can come with fees as high as $35 to $45 as well as a $200 to $300 tax preparation fee.
While some tax preparers explicitly point out that the fees are bank products and how much they cost, others don’t, Wu said. Consequently, many people may not even realize they have been charged.
Do I Get a Stimulus Check?
The first checks started going out the week of April 13, 2020. The Department of Treasury’s new portal, Get My Payment, opened on April 15 and announced significant enhancements April 26 to deliver an “improved and smoother experience.” Use it to track the following information, according to the IRS :
- Your payment status
- Your payment type
- Your expected payment date
- Whether the IRS needs more information from you, including bank account information.
Myths About the Stimulus Payment
Rumors are flying fast and furious, as are scammers. Keep the following myths in mind as you prepare to receive your payment—or examine your account once it arrives.
Myth #1: I will have to declare my payment as income for 2020.
Stimulus checks are not taxable. They are considered refundable tax credits and therefore not subject to income tax.2
Myth #2: If my 2020 income is higher than in 2019, I will have to pay money back.
While it’s true that your stimulus check is calculated based on your 2018 or 2019 tax return and is intended as a refundable tax credit for 2020, if your 2020 income is higher than in the year used to calculate your stimulus payment, you do not have to pay back the difference.2
Myth #3: If my 2020 income is lower than in 2019, I won’t get the difference.
If your 2020 income is lower than in 2019 in a way that means you would have qualified for a larger stimulus check than you received, you can apply for the difference when you file your 2020 taxes in 2021.2
Myth #4: Any refund I receive in 2020 will be reduced by the amount of this stimulus payment.
The stimulus is a refundable tax credit, not a regular refund. Your refund for tax year 2020 will not be affected by the stimulus payment.2
Myth #5: If my dependent child turns 17 in 2020, I have to give that money back.
The rules state that the dependent child must be under the age of 17 at the end of 2019. So long as that is true, it doesn’t matter that your child turns 17 in 2020.3
Myth #6: If I did not claim my under-17 child as a dependent in 2019, I will not get the $500 payment for that child.
While you will probably not receive the dependent payment now, any child or children, including a baby born this year, you claim on your 2020 taxes will be eligible for the $500 payment when you file your 2020 taxes in 2021.
