Recent IRS developments affecting individuals: COVID-19 stimulus payments, refund delays, and electronic Form 1040-X

One of the most far-reaching provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, was the issuance of Economic Impact Payments, often referred to as stimulus payments. These payments are generally $1,200 to individuals and $2,400 to married couples, with $500 additional amounts for dependent children under age 17. The payments are based on 2018 or 2019 adjusted gross income (AGI), phased out over the following AGI ranges.

• Single and married separate: $75,001-$99,000
• Head of household: $112,501-$136,500
• Married joint: $150,001-$198,000

First, the IRS issued these payments via direct deposit to taxpayers who had bank account information entered on either their 2018 or 2019 Form 1040 for direct deposit of refunds claimed. Next the IRS began issuing checks based on ascending income where bank account information was not provided. The IRS said this week that after two months it has issued more than 159 million payments totaling nearly $267 billion.

In late May, the IRS began issuing some payments on prepaid debit cards. The IRS announced that the payment cards are sent in plain envelopes from Money Network Cardholder Services, with Visa appearing on the front of the card and MetaBank, the issuing bank, on the back. The card comes with instructions on how to activate and use it; users can transfer funds to a personal bank account, make purchases online and at any retail location where Visa is accepted, and get cash from in-network ATMs without incurring any fees.

It has come to our attention that the IRS is experiencing delays in issuing 2019 refunds requested by Form 1040 filers on electronically filed income tax returns. This has been caused both by the displacement of IRS employees from their normal work locations due to the pandemic and by a processing glitch encountered in March. Paper returns have also been delayed due to staffing issues and decontamination efforts. There is nothing that taxpayers can do but be patient. 

The IRS recently announced that it expects sometime this summer to be able to receive 2019 amended personal income tax returns, Form 1040-X, electronically. Form 1040-X has always needed to be paper-filed. In a typical year, the IRS receives a few million amended individual income tax returns. The IRS stated policy is to expect a refund requested on Form 1040-X to take up to 16 weeks to be issued. Hopefully, electronic filing will lead to a more rapid turnaround time.

The IRS is doing the best it can with limited resources. Its operations have been disrupted by the pandemic, no different from most private-sector businesses with limitations on the work their employees can perform from home. Contact your CohnReznick tax professional should you need assistance with any IRS-related matter.

Neil Becourtney, CPA, Partner, Tax

732.380.8678