Stimulus Check Snafu Means Some Must File Taxes First

Payments Went to 13 Million Erroneous Bank Accounts, According to One Estimate

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The government’s rollout of $600 stimulus checks has run into some major glitches, with the IRS inadvertently sending direct deposits to closed bank accounts and saying that some recipients will have to first file 2020 tax returns in order to get their money.

Tax preparer Jackson Hewitt estimates there have been problems with more than 13 million bank accounts.

Key Takeaways

  • The IRS inadvertently sent some stimulus checks to the wrong bank accounts.
  • Tax preparer Jackson Hewitt, citing its industry sources, estimates there were problems with more than 13 million bank accounts.
  • Tax preparation companies said they were working to fix the problem for their customers. 
  • Though the IRS had told people they would receive their payments automatically, the agency now says some will have to file their 2020 tax returns in order to get the money.

People who see "Payment Status #2 – Not Available" when they use the online “Get My Payment” tool to check the status of their payments will not receive a stimulus check and instead need to claim a credit on their 2020 tax return in order to get their money, the IRS posted on its website Tuesday. Bank account issues are one reason someone would see this message, the IRS said, but didn’t make it clear if there were others.

“Due to the compressed timeline, the IRS is unable to reissue and mail checks and instead encourages people to file their 2020 tax return electronically to claim and receive the Recovery Rebate Credit (as) quickly as possible,” the IRS said in a statement, blaming how fast the agency had to distribute the funds for payments being sent to inactive, closed, or unfamiliar accounts. 

The IRS, which didn’t respond to repeated requests seeking more information on the statement, told people one day earlier that they didn’t have to do anything to automatically receive the stimulus payments. The agency is using bank account information it has on file from 2019 tax returns to distribute the payments from the U.S. Treasury. 

TurboTax said in a blog post Wednesday that it’s working with the IRS to fix the problems and payments should begin arriving in the correct bank accounts “within days.” Jackson Hewitt said Thursday it too is working on it, but for those affected, the quickest way to get the money is to file a tax return.

H&R Block, on the other hand, has posted on its website that less than 1% of stimulus payments it processed were affected, and for those that were affected, the IRS is likely mailing checks instead. 

Meanwhile, social media accounts for all three have been bombarded by complaints from angry customers.

The IRS did not respond to questions about how many taxpayers had their money sent to erroneous accounts, how many would have to file a 2020 return to get their payment, or whether payments being sent to closed or invalid accounts was the only reason someone would see “Payment Status #2 - Not Available.”

More than 13 million payments have been sent to closed or invalid bank accounts, Jackson Hewitt spokesperson Samantha Bartlett said in an email, citing the company’s “industry sources.” 

The IRS began issuing payments shortly after the latest pandemic relief bill was signed into law on Dec. 27, and payments totaling $112.3 billion were issued on Monday, about 68% of the estimated $166 billion to be distributed, according to online data posted by the Treasury Department. But the next day—the latest date listed—the data shows a negative $3.77 billion, suggesting some money has been returned to government coffers.  

One possible reason for the IRS to have information on file for a closed bank account is that tax preparation services who act as middlemen sometimes set up temporary bank accounts in order to offer refunds in advance. 

H&R Block also pointed out in a Twitter post Monday that the “Get My Payment” website could display an account number customers don’t recognize if they previously got a refund transfer, where the charge for the tax preparation was deducted from the refund amount. But in those cases, presumably since the accounts weren’t closed, the funds were delivered, according to H&R Block.