The IRS changed the tax filing rule for Social Security recipients — why that’s a good thing

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The Internal Revenue Service reversed a decision that would have required Social Security recipients and many senior citizens to file a tax return this year, even if they’re not required to do so, in order to get the $1,200 stimulus check. That might have saved millions of people from losing out on the money.

The rebate checks are part of the $2 trillion stimulus package President Donald Trump signed into law last week, intended to provide financial relief to Americans in the wake of the coronavirus pandemic. People can receive a rebate check up to $1,200 per person. To be eligible, recipients cannot be nonresident alien individuals or a dependent for someone else. Anyone who earns less than $75,000 will receive the full $1,200, and that amount will decrease until the cap at $99,000. Taxpayers who are married filing jointly will receive $2,400 if they earn $150,000 or less, with the phase out range up to $198,000. Individuals can receive $500 per child under 17 years old.

The government said it would use 2019 tax returns to determine eligibility. If those returns have not yet been filed, it will use 2018. The Treasury Department will distribute money electronically with the bank information on file.

See: This is how the $2 trillion coronavirus stimulus affects retirees — and those who one day hope to retire

But there are people who are eligible and do not file tax returns. Over the weekend, experts said the government could use Social Security statements for those who claim any type of benefit, such as retirement or disability, but the IRS said in a FAQ on its site on Monday that people who do not normally file a tax return will need to do so this year to receive the check. On Wednesday, the agency changed the rule again, and said on its site Social Security recipients and railroad retirees will not have to file a tax return to claim the money.

The IRS will use Forms SSA-1099 or Form RRB-1099 to calculate and send the money to Social Security beneficiaries and railroad retirees, respectively, it said. Because no information is given about dependents on these documents, individuals will only receive up to $1,200 per person, and nothing for potential dependent children.

Low-income workers, some veterans and others who are not required to file a tax return will have to do so in order to receive the rebate check, the IRS said. People with income lower than the standard deduction — $12,200 for single people and $24,400 for married filing jointly in 2019 — are not required to file a tax return. They will not owe tax, the agency said.

Allowing Social Security beneficiaries to receive their checks without filing a tax return is a good thing, critics argue. Requiring people to file tax returns when they normally don’t do so would — and still will in certain cases — cause more confusion, and leave many eligible Americans with no stimulus check. “There is a risk they will fall through the cracks and they won’t get their payments,” said Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities. “Especially now — we’re in the middle of a pandemic.”

Approximately 3.5 million Social Security beneficiaries and veterans did not receive a stimulus check in 2008 during the financial crisis, even though they were eligible, according to Social Security Works, an advocacy group that supports expanding the program. The government said they would need to file a tax return even though they didn’t owe taxes. This raises concerns that people might not receive a stimulus check they’re entitled to, or it may be delayed at a time when they may need it most, the organization argued.

This year, more than 15 million Social Security recipients do not currently file tax returns, and are not required to do so, according to the CBPP.

The decision to require people to file a tax return sparks other questions, said Riley Adams, a Certified Public Accountant, author of the “Young and the Invested” website, and MarketWatch contributor. Such as, will recipients need to file another tax return next year, to claim the tax credit they received this year? (The stimulus check is nontaxable, but it is technically considered a credit.) And what will individuals do if they need face-to-face professional tax assistance but can’t go to a preparer in the midst of state and local quarantines and lockdowns? There are still many unanswered questions, though the government is expected to provide more guidance in the coming weeks. “A lot of details are still in motion,” Adams said.

Also see: Receiving Social Security disability benefits? Living abroad? How much — if any — of the $1,200 checks Americans in special situations will get

Requiring Americans who don’t normally file tax returns to start doing so for the rebate check could become problematic for the IRS, too, Marr said. The agency is already inundated with calls and questions, and this operation would make it worse. “Plus, you’re just inviting the risk of scam operations out there, and seniors are frequently the target of such things,” he said.

The IRS said this group will need to file a “simple tax return,” which includes information such as filing status (single, married filing jointly, married filing separately, head of household or widow/widower), number of dependents and direct deposit bank account information. The agency said more information on how to file will be available on its page dedicated to coronavirus updates. The government said it was creating a web-based portal for individuals who do not have direct deposit set up, so that they could receive payments “immediately” instead of waiting for the mail to arrive.

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