Here They come - Letters recalculating the stimulus credit

[Corduroy Frog]

Already have some, with increased activity showing up this past week.  When I prepared taxes for 2020, I had to inquire from each client the amount of stimulus payments received to determine whether a credit would be forthcoming.  Most of them were unprepared to answer - many of them had to review their bank accounts, and some of them tried to answer off the top of their heads.

I would think the IRS (being the paying agent) should have records that are infinitely more accurate than taxpayers, but I think I'm giving them too much credit.  I have a couple families that are being "corrected" when I can remember reviewing their bank statements with them in a sit-down session.

I'm also throwing this out to ask the forum for possible remedies.  No one wants to go to Tax Court, or any court for that matter.

[TAXMAN]

I have seen 5 this week where IRS has adjust and gave TP more$ even after TP said they already got it. do you send back?

[Sara EA]

I remember reading that with the Dec tax law changes and the Dec-Jan 3rd stimulus payment, the IRS didn't have the time or resources to coordinate the computers that contained the stimulus with the 2020 tax computer systems.  Therefore all returns that claimed a rebate recovery had to be hand reviewed, leading to huge backlogs in a department that typically cleared its inbox every day.  The delays caused many refunds to be paid after the 45 day statutory period, so many got more than they thought because interest was added.  I believe the interest was paid back to April 15 because in their haste, congress never considered that the due date was changed to May.

Like everyone, I've been getting several of these letters recently.  One was from a guy who got a bill from IRS.  My notes showed that he supposedly looked up his stimulus amount and I used the figure he gave me.  When he called about the letter, he said he looked it up and IRS was right!  I always queried every client who gave me an amount that the software didn't predict or who said they got nothing.  Most looked it up and agreed with my calcs, some didn't and are getting letters.  We can't trust ordinary people who never even glance at their bank statements to go back and try to figure out what's in there.  Next season our questionnaire is going to have two questions at the very top:  How much did you get for stimulus and how much for advance child tax credit, with a warning that their return will not be started unless those questions are answered.

[Catherine]

Oooh, @Sara EA I *like* that warning that the return won't be started until those questions are answered!  May have to snag that for our letter, too.

[Gail in Virginia]

I have had at least one client who swears she did not get the second stimulus payment, and actually looked at the bank accounts to check,  but got the letter from the IRS saying that she did.  When we checked, they had issued the payment as a debit card.  Once they have done that, the only recourse is to contact the "bank" that actually issues the debit cards for the IRS.  She did that, and they reissued the card, but after she activated the card, it showed a zero balance.  And apparently it is impossible to talk to an actual person to get anything cleared up.  This is a huge waste of my time holding their hand through all of this. 

[Lion EA]

I have been standing firmer, more so late in this season, about not starting returns until I receive the signed engagement letter AND the signed due diligence questions, which include EIP1, EIP2, & EIP3. Few will remember EIP3 next year, and many are confused about reporting EIP2 now instead of next year, so I ask for all three.

My questions also include the 2021 advance CTC payments, because few will remember next year. So, getting the first one, two, or three gives me a good reminder about asking for the rest of them next year.

[TAXMAN]

Good points made by all. I still go back to my original question Do you send it back?

[schirallicpa]

just received from a client IRS Form Letter 6470 that says he either had too much income or already received it.  I'm thinking this is going to be a debit card one that the TP never realized was his stimulus and threw away.  

This has all turned into such a mess.  In 5 years someone will have calculated the cost of this stimulus BS and it will well exceed the benefit.  Kinda like Obamacare.  Nonsense!

 

 

[jasdlm]

I have 3 notices this week -- all adjusting the stimulus I calculated downward.  No fun.

[Catherine]

We started collecting EIP3 data when people were confused about EIP2 pmts received in Jan/Feb.  Have maybe half of those already.  

Ugh.  What a nightmare!

[JohnH]

On 9/27/2021 at 12:18 PM, TAXMAN said:

Good points made by all. I still go back to my original question Do you send it back?

I would not send back. I would tell the client that IRS also makes mistakes, and Congress handed them an impossible task with the restrictions and exceptions on the stimulus payments.  And it may take IRS months or even years to sort this all out. So they should be prepared to repay the “excess” payment, with interest, at some unknown point in the future.  
 

if that happens, they have been forewarned.  If it doesn’t happen, then they won’t remember. 

[Catherine]

6 hours ago, JohnH said:

if that happens, they have been forewarned.

But do it in writing (even email) so if/when the bill comes and they blame you, you can prove that you warned them!

[Sara EA]

Gail, did your client's debit card perhaps get stolen and used by a thief?  Anyone get one and know how they get activated?  Is it easy for someone else to do?  And how did IRS decide who gets a debit card?  I have one client who got the 3 stimuli payments all three ways--direct deposit, check, and dr card.

I find it hard to believe that so many people just threw them out.  When an envelope contains a plastic card, you can feel it.  When you get a credit card the month your old one expires, it too comes in a nondescript envelope.  Do people throw those out too?

[WITAXLADY]

you know you can look up the stimulus they received!

Oh wait - only the very last one! how helpful..

D

[Lion EA]

I didn't throw any out. However, they look just like all the offers I get for credit cards, for AARP and other memberships, and for so much junk mail that includes a plastic card. I'm not surprised that people tossed them out thinking they were junk mail.

[Gail in Virginia]

I am not sure  how  clear it was that the card was  from the IRS.  It is an actual bank card, although I forget the name of the bank.  I don't often see actual credit cards in the mail as a solicitation to open a new credit card account, but I used to and I suspect other people  did as well.  I always shredded those, so I could  see myself shredding this also. 

[Catherine]

1 hour ago, Gail in Virginia said:

I don't often see actual credit cards in the mail as a solicitation to open a new credit card account

They don't send out real cards anymore, but the do send fake cards that look real - along with an application. Plus plastic "membership" cards with donation solicitations, and more.  They all look real, until you look closely.

[jklcpa]

2 hours ago, Gail in Virginia said:

I am not sure  how  clear it was that the card was  from the IRS.  It is an actual bank card, although I forget the name of the bank.  I don't often see actual credit cards in the mail as a solicitation to open a new credit card account, but I used to and I suspect other people  did as well.  I always shredded those, so I could  see myself shredding this also. 

If it helps, I had one client that saved all the paperwork including one EIP that came on plastic.  It seems very clear to me that it was from the U.S. government and what it was for.  From some of what I blacked out though, I believe this client received this in June 2020, so maybe there was more awareness that payments were being made on plastic by then whereas recipients earlier on may not have realized that.
 

Edited October 6, 2021 by jklcpa
converted pdf to photos

[SCL]

early on you could find stim 1 & 2 for taxpayer under "where's my stimulus"(or something like that). that was shut down after awhile but way too early

why a confusing debit card was issued is a complete mystery to me...irs morons

[TAXMAN]

I was wondering if IRS has a tracking device for all those cards that were not used and send TP a notice as if they nothing else to do? I had several that said they did not get them and then when filed 2020 IRS said they did. What a mess. I am wondering how they will handle the 1400 one when we do the 2021 return.

[Lee B]

Replace a Lost or Stolen Card

If you have misplaced your Economic Impact Payment Card, you can lock it by logging in online at EIPCard.com to prevent unauthorized transactions or ATM withdrawals while you look for it.

If your Card is permanently lost, it is important that you call Customer Service at 1.800.240.8100 (TTY: 1.800.241.9100) to report your lost or stolen Card immediately. Your Card will be deactivated to prevent anyone from using it and a new1 replacement Card will be ordered. Fees may apply1.

Please refer to the material in your Welcome Packet or see your Cardholder Agreement for more information

[jklcpa]

11 hours ago, SCL said:

why a confusing debit card was issued

It was to speed up the delivery of the stimulus payments. IRS and SSA don't have banking information for everyone, and even then can only process "X" number per day, so that means mailing payments. Again, IRS can only physically process a certain number a day or week, so it contracted with the bank to issue some on plastic.

[Sara EA]

Apparently if you owed tax and requested a direct debit, even though IRS had your banking info the return only authorized them to take money out, not put it in, so those folks may have gotten checks or dr cards.  SS recipients have direct deposit info on file with SSA, so I'm not sure if IRS was able to use that if the client owed tax.

[WITAXLADY]

so if you do not add it cuz taxpayer does not remember - will the IRS add the missing stimulus???