Stimulus Payments: How Did The U.S. Botch Its Rollout So Badly?

This week, millions of Americans woke up to find an extra $1,200 in their bank account as part of the coronavirus stimulus package.

But millions did not.

What followed was an eruption of people asking how: How is it possible for one of the most advanced countries on Earth to fail a majority of its citizens right when they need it most?

The answer is not simple. The short answer? The U.S. rollout of coronavirus stimulus payments by the Internal Revenue Service (IRS) has been flawed from the start. Comparing America’s response to that of other countries has also exposed the cracks in one of the country’s oldest institutions.

Old technology, small budget

“The main thing our federal government has issues with boils down to technology,” said Dan Henn, a CPA in Rockledge, Florida. “The IRS technology system is antiquated in a lot of regards.”

The technology the Internal Revenue Service (IRS) processes your tax returns on has been a decades-long running joke: Half of the agency’s computers run on ancient Microsoft software, and code that is over 50 years old. The agency’s tech is so laughable, the IRS Commissioner Charles Rettig said upgrading it is a top priority. The upgrade did not come soon enough.

But outdated tech is not the only thing the IRS is up against right now. For years, the budget for the IRS has essentially been eviscerated. Currently there are fewer tax auditors than there were in 1953. This means there are fewer people who are able to audit tax evaders, resulting in millions of dollars lost for the government every single year.

Mix bad tech, a small budget, and a pandemic together, and you get a public crisis with little to no communication. Many IRS employees issuing stimulus payments are working from home in self-isolation themselves, too, said Henn, and have cut off the public to any sort of customer service opportunities.

The IRS coronavirus tax relief web page has also been littered with error messages in recent days, and prominently states “Do not call” — leaving many without internet access or with extenuating circumstances with only a hope and prayer that a paper check will show up in the mail…eventually.

Lack of communication

Janet Holtzblatt, a senior fellow at the Tax Policy Center, said this type of stimulus package is unprecedented in a lot of ways, but taxpayer disappointment could have been prevented if the IRS communicated specific information as to what it was going to use to send payment up front, clearly, concisely, and broadly.

“You have to remember the IRS is human,” said Holtzblatt, who noted the agency itself has seen massive cuts, and has been closing down its main operation, tax assistance centers, and even stopped opening mail.

Illustration: Malte Mueller/Getty Images, Adapted by: Chris DeGraw/Digital Trends

Holtzblatt also said it is important to give credit when it’s due. In past recessions, like 2001 and 2008 where taxpayer relief was given, months of planning went into the policy and payment rollout before people saw cash in their accounts. It’s been three weeks since the CARES Act passed.

“Does anything ever work perfectly on day one?” she said. [The IRS has] achieved more than I expected, but I am not surprised that these glitches have shown up.”

Third-party tax preparers

Many who have filed their taxes with third-party tax preparers like TurboTax, H&R Block, or Jackson Hewitt have found that they haven’t gotten their stimulus checks.

A glitch occurs because the IRS won’t have users’ direct deposit information on file — only a temporary bank account where third-party preparers can access to withdraw their portion first before sending the rest to you. The Washington Post reported up to 21 million people could be affected by this and the U.S. Department of Treasury is already aware.

A TurboTax spokesperson told Digital Trends that ultimately, the IRS is responsible for distributing stimulus checks.

“The IRS is responsible for determining taxpayer eligibility of receiving a stimulus and, if a taxpayer is eligible, how and when the stimulus payments will be delivered to them.”

In a statement to Digital Trends, a spokesperson for H&R Block said, “[The IRS] created confusion by not always using clients’ final destination bank account information for stimulus payments. We share our clients’ frustration that many of them have not yet received these much-needed payments due to IRS decisions, and we are actively working with the IRS to get stimulus payments sent directly to client accounts.”

Not everyone files

Compared to other countries where every citizen is required to file a tax return yearly, the U.S. does not.

“The inherent flaw is we are basing it on tax return information,” said Henn.

Millions of Americans who make below a certain income, are retired, disabled, or on social security do not have to file a tax return, making coronavirus stimulus pay much more difficult to get to those people.

In Canada, where all citizens are encouraged to file taxes even if they do not have to, one person described the Canada Emergency Response Benefit (CERB), the more-generous Canadian equivalent to the stimulus payment, to the Financial Post as “so easy I thought it was fake.”

Canada’s response to the coronavirus has been touted throughout the world, with some critics drawing a stark contrast between the United States and its northern neighbor. Millions of Canadians were able to apply for CERB through an online portal, and on the first day the portal opened, the CRA processed nearly 1,000 applications per minute. Most Canadians received payment within three days of signing up.

In a statement to Digital Trends, a spokesperson for the Canada Revenue Agency (CRA) said, “We knew millions of Canadians were urgently relying on us to deliver in their time of need and it was our honour to not let them down.”

Big Brother

Henn said the messy stimulus rollout is not entirely the government’s fault. Many people who do file taxes yearly do not use accurate banking and address information on purpose.

“You can’t put it all on the IRS, there are people who don’t want to communicate with the IRS,” he said. “Now that is coming back to bite some people.”

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