Congress approved a round of direct payments to most Americans after the coronavirus pandemic hit, but a new study shows that the payments never got to some of the people hardest hit by the crisis.
Congress approved $1,200 payments to most adults and $500 for children as part of the $2.2 trillion CARES Act in March. A new study from the nonpartisan Tax Policy Center finds that nearly 40% of adults who live at or below the poverty level never received a payment. A recent study by the Federal Reserve showed that low-income Americans were the hardest hit by the economic crisis sparked by the pandemic, meaning that many people whose struggles have been exacerbated through no fault of their own have been left without aid.
About 30% of Americans over 65, who along with facing the highest health risk have also seen their unemployment rate skyrocket since March, also did not receive a payment, according to the study, which looked at payments sent out through mid-to-late May.
The study also finds a significant racial disparity, with nearly 74% of white adults reporting receiving a payment in comparison to 69% of Black adults, 64% of Latinx adults, and 54% of Latinx adults in families with non-citizens. Black and Latinx Americans have also been disproportionately affected by the dual health and economic crises.
“The challenge is that the payments are distributed through the income tax system, but the IRS generally does not know the whereabouts of low-income people who do not file income tax returns,” Janet Holtzblatt, the lead author of the report, told Salon. “The IRS was able to get the payments to many non-filers by using information provided from the Social Security Administration and the Department of Veterans Affairs.”
About 38% of people who did not receive a payment did not file a tax return in 2018 or 2019 and also did not receive Social Security benefits, meaning they had to needed to submit additional information through an IRS web portal developed weeks after the stimulus checks were announced.
Those “non-filers have to go to the IRS website to apply, but many low-income people had not done so by mid-May,” Holtzblatt said. “In some cases, they may not have had access to the internet, preventing them from claiming the payment.”
Though libraries and other facilities offer free internet services, most were shuttered throughout much of spring. IRS offices likewise were closed.
Moreover, some people simply did not know they were eligible for a payment. But you are one of the people who did not receive a payment, there is still time to claim it.
“The key now is outreach. People can still apply by Oct. 15 to receive a payment this year; otherwise, they should file an income tax return next year, even if they don’t owe income taxes,” Holtzblatt said. “The IRS is providing some assistance to state and local government agencies and nonprofits, but a lot of effort and resources are required on the ground to reach out to low-income people and assist them with the application process.”
Congress is expected to approve a second round of stimulus payments in the next round of coronavirus relief, though it remains unclear when that will be given that negotiations on Capitol Hill appear to have stalled.
“We’re talking about the same provision as last time,” Treasury Secretary Steven Mnuchin told reporters last week. “Our proposal is the exact same provision as last time.”
But that also means that exact same problems which prevented people from getting the first payment will continue in the next round.
“The pandemic presented unique challenges, which hopefully we will not face again. But the challenge of funneling assistance to all Americans during a recession will persist as long as only the IRS is given that responsibility,” Holtzblatt said. “Greater coordination between the IRS and the agencies that have ongoing contact with people living in poverty could hasten payments.”
Holtzblatt suggested that the IRS should work with agencies with whom people have the most contact, such as the ones that administer Medicaid and food aid programs. But even this approach “still would not provide an avenue for reaching people with little or no connection to government agencies,” because “they neither file tax returns nor receive Medicaid, Supplemental Nutrition Assistance Program (SNAP) benefits or other types of government assistance,” the study said.
As it did for 4 million people in the first round, the IRS could also send people without bank accounts pre-paid debit cards, but the results were not promising.
“The problem was they came in envelopes with the vendor’s name, and the cards have the vendor’s name,” Holtzblatt told USA Today. “So what do you do when you receive a card from somebody you don’t recognize? Many people did what I would have done and said, ‘Oh, that’s junk mail,’ and tore it up and threw it away.”
On the next round, the debit card envelopes should make clear that they are from the Treasury Department. “That would help get the money to people,” she said.
Rep. Richard Neal, D-Mass., the chairman of the House Ways and Means Committee, and Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, this week called on the Treasury Department to “resolve all outstanding taxpayer-specific issues and immediately send these Americans their payments.”
The two Democrats noted that the department estimated it would make 171 million payments but only sent 159 million. Since June, the pace of payments to people that were initially missed has been “unacceptable,” they added.
“As the pandemic continues to ravage the nation, Americans cannot wait any longer for the emergency assistance they were told would arrive in the spring,” Neal and Wyden said in a joint statement. “Treasury must take immediate and decisive action to pay all eligible Americans, including taxpayers who still await a payment date on the Get My Payment portal, individuals who have received a Notice 1444 but no payment and non-filers who do not have the technological means to register on an online portal.”
The statement added that the IRS had been “largely unresponsive” to people who have sought help by phone, mail and email.
The problems are similar to those which have plagued state unemployment systems. Many thousands of people still have not received any federal unemployment benefits before they expired on Friday.
The Treasury Department has only distributed about $323 billion out of an expected $428 billion which should have sent out, based on an analysis by Bloomberg. And state unemployment offices, which have been overwhelmed with record numbers of jobless filings, are still working through large backlogs.
“It is absolutely providing just a crucial lifeline to millions and millions of people,” Heidi Shierholz, a former Labor Department economist who now works at the Economic Policy Institute, told the outlet. “But at the same time, there just have been — and we all know this — just a huge amount of issues with getting those benefits to many, many people.”
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