Lawmakers demand answers about delayed stimulus payments for coronavirus

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A pair of Democrats on the tax-writing House Ways and Means Committee have sent a letter to Treasury Secretary Steven Mnuchin asking what has happened with the delayed economic impact payments that were supposed to help taxpayers cope with the fallout from the coronavirus pandemic.

House Ways and Means Select Revenue Measures Subcommittee chairman Mike Thompson, D-Calif., and Oversight Subcommittee chairman John Lewis, D-Ga., referred in their letter to pervasive news reports of payments incorrectly going to tax preparers or third-party banks and not to the intended taxpayer. They demanded answers from Mnuchin about the delays and returned payments, including what steps are being done to correct these mistakes.

The payments, which were included as part of the $2.2 trillion CARES Act, have in some cases been going to tax preparers, inactive temporary bank accounts set up by tax software companies and tax prep chains and private debt collectors.

“Given the ongoing economic and health crisis, it is imperative that Americans eligible to receive stimulus payments are provided such funds as swiftly as possible,” Thompson and Lewis wrote in their letter Tuesday. “Last week, we understand that Treasury attempted to pay $150 billion in stimulus payments by direct deposit to ‘80 million Americans.’ These payments were made using direct deposit information included on 2018 or 2019 tax returns. Based on press reports and constituent inquiries, however, it appears that many Americans did not receive scheduled stimulus payments as a result of incorrect banking information.”

They outlined some of the reported culprits behind the delay. “There seems to be a variety of reasons for the direct deposit issues,” they wrote. “It has been reported that there may be tens of millions of taxpayers who relied on commercial tax preparation software or services for whom Treasury cannot deposit the stimulus payment into their bank accounts. Other taxpayers may have received advances on their federal tax refunds through refund anticipation products, and their stimulus payments incorrectly went to third-party banks that provided the money for the advance to the preparers. While it is unclear why these payments were sent to accounts that should have been designated as temporary, we understand these stimulus payments should be returned to Treasury.”

Thompson and Lewis said they have heard that the Treasury may have incorrect, or closed, bank account information on file for some taxpayers, and some of the stimulus payments are being returned to the Treasury. Last week, the Treasury reported that nearly $1 billion in federal tax refunds were returned by financial institutions to the Treasury.

“There are many questions regarding this amount, including the number of payments returned, the reasons the payments were returned, and how many payments Treasury estimates will be returned,” the lawmakers wrote. “For Americans whose stimulus payments were returned to Treasury, it is important to communicate this information to them.”

Lawmakers further asked Mnuchin for information about the total number and dollar amount of stimulus payments that have been returned to the Treasury to date, what the leading factors are for causing stimulus payments to be returned to the Treasury, and when the stimulus payments are returned to the Treasury, what actions are being taken to ensure the funds are being promptly delivered to the intended recipients and to update any errors related to their account information.

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