Tax prep companies process millions of stimulus checks after IRS error
Ben Popken and Mohammed Syed
Updated 5 min read
TurboTax said Friday it would begin depositing stimulus checks for millions of Americans who faced delays after a foreseeable IRS error.
As many as 14 million people faced potential delays or uncertainty when companies closed alternative bank accounts where the economic impact payments would have been deposited, such as those used by tax prep companies to process refunds for customers, and reloadable debit cards. The much-needed checks, a lifeline for families affected by the pandemic, then “bounced” back to the IRS.
“Stimulus payments for millions of TurboTax customers affected by the IRS error will be deposited starting today,” spokeswoman Ashley McMahon said in an email to NBC News.
“We have been working tirelessly with the Treasury and IRS to get stimulus payments to our customers,” McMahon wrote. “We know how important these funds are for so many Americans and we regret that an IRS error caused a delay.” The company is posting updates on its site.
Tax preparer H&R Block, whose customers suffered the same frustrations, said in a statement it “resolved the matter for our clients earlier this week.”
Other tax preparation companies also blamed the IRS for its “error” and recommended customers contact their tax preparer's customer service for assistance. Spokespersons for reloadable debit card companies said customers should contact the IRS.
Similar issues were also seen in April for some taxpayers, but steps weren’t taken to prevent them from happening again, consumer law experts said.
The IRS didn’t immediately respond to a request for comment.
"If the second Economic Impact Payment was sent to an account that is closed or is no longer active the financial institution must, by law, return the payment to the IRS, they cannot hold and issue the payment to an individual when the account is no longer active," the agency said in an online FAQ.
"The IRS advises people that if they don’t receive the full Economic Impact Payment they should file their 2020 tax return electronically and claim the Recovery Rebate Credit on their tax return to get their payment and any refund as quickly as possible."
The move by TurboTax came after the issuance of statements by members of Congressin response to inquiries by NBC News,blasting the IRS after the complaints by consumers, and pledging to reform the agency under the new administration.
“I understand Americans’ frustration if they have not received their $600 relief check," Sen. Ron Wyden, D-Ore., ranking member of the Senate Finance Committee, told NBC News in an emailed statement. “Americans desperately need this relief and every day they go without it is a burden.”
“These difficulties are a symptom of Republicans’ decade-long effort to gut the IRS budget and keep the agency from doing its job,” Wyden said. “I will make improving IRS customer service a key component of our Democratic reforms.”
In the spring as the economic and health crisis deepened, 24 members of Congress sent a letter to the IRS calling for answers on why some families and individuals still hadn't received their relief checks, three months after the passing of the CARES Act.
“Americans need these relief checks to put food on the table and keep the heat on. These checks are already long overdue — any further delay is unacceptable,” Rep. Katie Porter, D-Calif., who signed the letter, told NBC News in an emailed statement on Wednesday.
“Just as I called for answers from the Trump Administration IRS last summer on why some people still hadn’t received their relief checks, I’ll continue to press the agency until they actually deliver the help Americans so desperately need during this crisis.”
The IRS is scheduled to send out letters within two weeks of issuing the payment telling taxpayers what they should do if they have any issues, including not receiving it. More info and resources were posted online by the the Consumer Financial Protection Bureau.
If a taxpayer doesn’t receive their stimulus payment, their only option to claim it may be on their next taxes. The IRS begins accepting returns for 2020 taxes in the next few weeks.
That won’t be soon enough for the desperate Americans who were banking on receiving their promised stimulus payment to put food on the table and stave off eviction.
“I was told because we chose to pay our tax preparation fee out of our 2019 refund, the stimulus was deposited into their (H&R Block) bank account instead of mine,” Cherish Long, a 27-year-old from West Memphis, Arkansas, told NBC News in an online message.
Recently unemployed, she had been planning on using the money to help pay for rent and life-saving insulin.
“Rent is officially late after today and I have enough insulin for the next day or so. Literally everything has been on my husband. We don’t even qualify for food stamps so this has been really difficult and really stressful,” Long said.
“This is rent week for most of us,” Destinee Coleman, a 28-year-old from Florida, told NBC News in an online message. She said she filed with TurboTax and had opted for "Refund Transfer" in order to pay for the cost of filing out her refund. “A lot of us were counting on this to help with rent payments," she said of her stimulus check.
Some of the low income customers who used the "Refund Transfer" system that got them in the bind in the first place may have been eligible for free filing services like VITA or IRS Free File.
Nearly 80 percent of taxpayers who use refund transfer products qualify for Earned Income Tax Credit, a refundable tax credit intended for families whose incomes are within 150 percent of the poverty line.
Americans spent nearly half a billion dollars in 2017 on products that help them get an advance or a loan against tax refunds and to file taxes, according to a GAO report.
