Does anyone seen an answer to this query:
If someone has not filed a 2019 return but did file a 2018 return with direct deposit information and that bank account is now closed, what happens when the bank rejects the electronic funds transfer?
Is the taxpayer put in the queue for an advance payment by paper check or is the taxpayer dropped from all queues and must rely upon the filing of the 2020 tax return to obtain the refundable credit?
971 AC 850 must post before, or in the same cycle as the refund. See IRM 21.4.1.5.7.1, Direct Deposit of Refunds, for further guidance."
There is also this from the "What You Need to Know" section of the IRS Coronavirus Tax Relief website:
"In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail."
Unfortunately, there is no indication of a time-frame for establishment of this portal, and it doesn't seem likely it will be up before distribution of payments begins next week.
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Man, where do you find this stuff? Good stuff. What causes a "freeze condition"? Can taxpayer initiate a freeze condition?
The quoted text comes from the Internal Revenue Manual, the operating manual for everything the IRS does. It's available on the IRS website, though parts are redacted.
Ira Smilovitz, EA Leonia, NJ
Read the first 4 replies, but I'm interested in the average guy who doesn't remember that the account used for 2018 was closed.
I am aware that if a bank rejects an electronic Treasury tax refund, the funds are returned to the Bureau of the Fiscal Service (Treasury agency) and they cut a paper check. I'm just wondering if the same process will be followed for an advanced payment of a tax credit.
Good ol'
Yes.
Ira Smilovitz, EA Leonia, NJ
So this is tangential but I thought I'd place it here.
A friend read that the stimulus payment is a "credit against 2020 taxes" and so is worried that it is just a loan against future tax liability as opposed to cash in their pocket.
Am I correct in telling them that is is indeed cash in their pocket?
Thanks
Steve
It is a credit against 2020 tax liability. Your 2020 tax liability will be $1200/person (ignoring the $500 dependent credit) less than it would be under the regular tax rules. If you receive the $1200 now, you don't get any more later. If you don't get the full $1200 now, you can get the balance later if your income is below the phaseout threshold. If you get more now than you are entitled to on your 2020 return, you don't have to pay anything back.
For those who can remember back to 2008, this is the same procedure used for the Bush prebate, except that in 2008, the prebate credit could be used to offset existing tax liabilities. The 2020 law only allows offsets against outstanding child support obligations and (I believe) criminal penalties.
Ira Smilovitz, EA Leonia, NJ
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