With no decision yet on the next round of stimulus package, the IRS has time to address issues with the first stimulus checks. On Tuesday, the agency announced that it would be sending catch-up Economic Impact Payment or coronavirus stimulus checks to 50,000 spouses.
These catch-up payments relate to the mistake that the IRS made in processing the payment for certain taxpayers while issuing the first stimulus payments.
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Those eligible to get the catch-up payment are the ones who file taxes jointly with a spouse and had past-due child support. Also, the stimulus payment of such users improperly went toward paying the overdue support. Primarily, it would cover taxpayers who filed Form 8379 with their 2019 or 2018 tax return, but got improper checks.
Such users need not take any additional action to get the payment. The IRS says it has now corrected the issue, and will mail the physical catch-up coronavirus stimulus checks in early to mid-September.
Separately, those who didn’t file Form 8379 but faced the same issue with their stimulus checks, will also be sent a catch-up stimulus check. But, it could take some time for the IRS to issue the checks for such users.
According to the IRS, such users should not file Form 8379 or take any other action. “The IRS does not yet have a timeframe but will automatically issue the portion of the EIP that was applied to the other spouse's debt at a later date,” the agency said.
What was the actual issue?
Normally, the IRS can offset tax refunds for several reasons, including if the taxpayer has some outstanding debts. For example, your tax refund check will be reduced by the amount of your outstanding tax obligations.
The CARES Act, however, stipulated that the IRS would not use the stimulus check amount to adjust any such outstanding obligations. There was an exception to this rule, and that was past due child support.
However, in a rush to send out payments, the agency improperly withheld payments of about 50,000 spouses. This means the IRS withheld the payment even for those who filed Form 8379 (Injured Spouse Allocation) with the 2018 or 2019 tax return.
Such a form notifies the IRS that it should not withhold money from the “injured spouse” because of any outstanding obligation owed by their husband or wife. The IRS first noticed this issue in May.
“The IRS is aware that in some instances a portion of the payment sent to a spouse who filed an injured spouse claim with his or her 2019 tax return (or 2018 tax return if no 2019 tax return has been filed) has been offset by the non-injured spouse’s past-due child support,” the agency said at the time.
Further, it also said at the time that it was working with the concerned authorities to address this issue quickly. However, it gave no timeline, but now, it has resolved the issue and will soon send out catch-up coronavirus stimulus checks.