Lawmakers have struck a $ 2 trillion stimulus deal Wednesday morning, which includes sending checks directly to individuals coronavirus crisis – but it will probably take at least until May before the money comes out.
President Donald Trump and Treasury Secretary Steven Mnuchin are still pushing for direct payments to be issued by April 6, a White House official told CNN. The date was proposed earlier as a deadline by Mnuchin during negotiations.
Mnuchin said on Wednesday that the administration plans to start issuing direct payments to taxpayers within three weeks of signing a stimulus package.
“We hope that within three weeks we will have direct payments where we have deposit information,” Mnuchin said. “We’re looking to get a lot more information and we have procedures to do it.”
Mnuchin added that by the end of next week, the administration wants all banks to be able to make loans on the “same day”.
Under previous programs in 2001 and 2008, the government took over a month to distribute the checks.
“It’s extremely unlikely that people will get payments by April 6 – just two weeks away,” said Howard Gleckman, senior researcher at the Tax Policy Center. “It’s more realistic to expect them in a month or two.”
$ 1,200 for individuals, $ 2,400 for couples, $ 500 per child
Under the bill, single Americans would receive $ 1,200, married couples $ 2,400, and parents $ 500 for each child under 17.
However, payments would begin to disappear for people with adjusted gross income over $ 75,000, and those earning over $ 99,000 would not be eligible at all. The thresholds are doubled for couples.
About 90% of Americans would be eligible to receive full or partial payments, according to estimates by the Tax Policy Center. Lawmakers have set aside $ 250 billion for so-called clawback rebates.
Eligible income levels will be based on 2019 federal income tax returns, if they have already been filed, and 2018 returns if not. (Mnuchin earlier this month extended the filing deadline to July 15.)
There are provisions in the bill to include those who don’t earn enough to file returns, but some people may be missed, Gleckman said.
Under the legislation being negotiated, low- and middle-income Americans would receive just over two-thirds of the benefits, Gleckman said. An earlier version of the bill would have given low-income households less or no assistance.
How it worked in 2001 and 2008
The Internal Revenue Service sent economic stimulus checks before.
In 2001, it took the IRS six weeks to start sending out rebate checks authorized by President George W. Bush’s tax cut. Then in 2008, in the midst of the Great Recession, it took three months for the checks to start coming out after Bush signed the law. In this case, Americans had to file their income tax return first in order to get the check. After they filed their return, it took between eight and 12 weeks to see the money.
“Certainly from what we’ve seen in the past, it took a long time to get the checks out after a policy was put in place,” said Erica York, an economist at the Tax Foundation.
Those who had authorized direct deposits to their bank accounts were likely to receive their money faster, York said. These deposits were made over a three week period in 2008, while the paper checks were mailed over a 10 week period.
Americans could receive the stimulus payments a bit faster than in 2008 because more of them now file electronically and provide the IRS with their banking information, Gleckman said. About 88% of individual returns were filed electronically in 2018, compared to 58% in 2008.
Nina Olson, who served as national taxpayer counsel for the IRS from 2001 to 2019, said Wednesday that “maybe, maybe” some payments could be issued by April 6, likely to people who have already filed their declarations.
Coronavirus Has Impacted IRS Staffing
But there are other factors that can slow down the process. Even in the absence of coronavirus challenges, the agency is working with a smaller budget and fewer staff than in 2010.
Now, because of the coronavirus, the agency has shut down its in-person taxpayer assistance centers located across the country at a time when people are sure they have questions about emergency checks and other changes. The Treasury announced last week that it extending the tax filing deadline to July 15. Additionally, Congress created a new tax credit designed to reimburse companies that offer their employees paid time off related to the coronavirus.
“It’s just a recipe for confusion,” Olson said.
“There can be a lot of complexity involved in something as simple as sending a check,” she added.
First, the IRS will need to calculate each person’s payment amount. Then he will need the direct deposit information or the correct mailing addresses. To obtain money from people who do not generally file income tax returns, you may need to request this information from the Social Security Administration or Veterans Affairs. In 2008, these people had to file a return anyway to get their refund.
During this time, the IRS will inevitably respond to calls from Americans concerned about when their check will arrive and whether they have taken whatever steps are necessary to receive the money. In 2001, the agency sent letters to taxpayers telling them that they had nothing to do to receive their check. But instead of avoiding appeals, the notice had the opposite effect. This culminated in the agency’s first day of appeals, Olson said.
Later in 2008, after sending the economic stimulus checks, Olson testified before Congress, tell lawmakers that they should fund a new unit within the agency dedicated to facilitating new and emergency initiatives. She argued that this would allow other employees to focus on improving existing systems and carrying out the day-to-day work of the agency – but it never happened.