WASHINGTON, DC – JANUARY 18: Vice President-elect Kamala Harris and her husband Douglas Emhoff fill … [+]
In March 2020, Congress started down the rather unusual but not unprecedented path of sending people checks to help them deal with effects of the COVID-19 pandemic and economic downturn.
Nationwide, as many as 8 million households appear to have been eligible for this first round of economic impact payments (EIPs) but had not received the money by the end of December. Others had not received the full amount to which they were entitled. Some of those households live in the lowest-income wards of Washington DC: Nearly one in four people who participated in the THRIVE East of the River (THRIVE) partnership in Washington, DC reported that they did not receive an EIP.
In most cases, the nonrecipients probably didn’t file a tax return for 2018 or 2019—the tax years on which the EIPs were based. This left them one option to get the EIP in 2020: apply on-line on the IRS website—an option available only to those who had access to the Internet.
A final option exists for those still waiting: file a 2020 tax return. Because what has long been the case for parents with earnings below the filing threshold might be the case for others as well this year: filing a tax return could mean getting a big tax refund.
WHO DIDN’T GET THE ECONOMIC IMPACT PAYMENT IN 2020?uring 2020, two rounds of EIPs were authorized in response to the pandemic. The initial EIP, included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was worth up to $1,200 for a single adult or $2,400 for a married couple plus $500 per dependent child under age 17. Legislation passed at the end of December added another $600 per person (including dependents of any age).
My Urban Institute colleagues, Janet Holtzblatt and Michael Karpman, found that about 70 percent of people between the ages of 18 and 64 reported receiving the first round of payments by mid- to late-May. But only about 59 percent of those with incomes at or below the federal poverty level stated that they had gotten the EIP.
In early analysis of who had received their EIP, about 40 percent of the very lowest-income people did not initially receive them last spring. Payments were automatically sent to people who appeared eligible based on their income tax returns for 2018 or 2019 or if they received certain benefits from the Social Security Administration or US Department of Veteran’s Affairs. Not everyone falls into one of these groups.
Most married couples with incomes below $24,800 and single people with incomes below $12,400 don’t have to file a 2020 income tax return. That group includes parents who didn’t have jobs that year (and thus were ineligible for the earned income tax credit and child tax credit) and low-income workers not raising children. To apply for the EIP, they needed to access the IRS’s new nonfiler tool—essentially a simplified return—but Janet and Michael found that one in five potentially eligible people who didn’t receive the payment last spring also lacked access to the Internet.
WHO DIDN’T GET ECONOMIC IMPACT PAYMENTS IN WASHINGTON DC?No doubt, some neighborhoods were less likely to get EIPs than others. About 22 percent of people participating in the THRIVE East of the River (THRIVE) partnership in Washington, DC reported not getting their EIP. THRIVE is a partnership among Martha’s Table, Bread for the City, the Far Southeast Family Strengthening Collaborative, and the 11th Street Bridge Park (a project of Building Bridges Across the River) that provides grocery assistance and direct cash payments of up to $5,500 to about 400 households in the District of Columbia. Participants live in Wards 7 and 8 of DC, DC’s two lowest-income neighborhoods that have been hit particularly hard by the pandemic. Over 40 percent of THRIVE participants had incomes below $10,000 in 2019 – well below the tax filing threshold.
HOW CAN PEOPLE GET THEIR ECONOMIC IMPACT PAYMENTS?For those who missed receiving EIPs the first or second time around, filing a 2020 income tax return will provide a final chance to receive payments. In addition to last year’s EIPs, another $1,400 per person is most likely on its way via the American Rescue Plan—bringing the potential total payment to up to $3,200 per eligible person.
Filing a tax return can be burdensome. But in 2020, low-income people should ignore the filing thresholds and file an income tax return. It provides another chance to make sure the proper EIPs are received. And filing early and filing electronically will speed the delivery of those payments.
As for the burden of filing, it can be reduced—and the ability to file electronically can be enhanced—by going to a Volunteer Income Tax Assistance site, where tax returns will be completed by trained volunteers for free.
I am a principal research associate at the Urban Institute-Brookings Institution Tax Policy Center, where I study the intersection of low- and middle-income families, the