Available Now! Real Estate Agent Tax Cut Library book

On March 27th, 2020, President Trump Signed the Coronavirus Aid, Relief, and Economic Security Act (CARES) into law.  The Act brings 2-trillion dollars of aid to individuals and businesses impacted by the COVID-19 virus. One provision of the law, Economic Impact Payments (AKA stimulus checks, rebate checks, and relief checks), is designed to place cash in the hands of Americans quickly.   This article will discuss how to get these funds to many who desperately need them but are unable to obtain them on their own: The homeless.

Economic Impact Payments Basics

Economic Impact Payments distributed in 2020 are the advance of a refundable income tax credit appearing on 2020s individual income tax return (Form 1040).  Pretty much everyone in the US who; 1) has a valid social security number, 2) is not the dependent of another taxpayer, and 3) has income below a certain threshold qualifies.  EVERY individual, including those who are homeless, that meets these requirements, is entitled to payment.

Payment Amount

The Economic Impact Payment is $1,200 for individuals (including those married filing separately) and $2,400 for married couples who filed taxes jointly on their most recent tax return (2018 or 2019).  The Act also provides an additional $500 for each qualifying dependent under the age of 17 claimed on that return. There is no limit to the number of dependents that qualify, but there are income phaseouts.  I address the income phaseouts in this article and will not repeat here since they do not impact the homeless

Facts You Need to Know When Assisting the Homeless

The CARES Act makes Economic Impact Payments reasonably straight forward.  As mentioned above, every US citizen who has a social security number and is not a dependent qualifies for a $1,200 payment.  Many of the homeless qualify. The catch, however, is this: If the individual does not receive social security or VA Benefits and has not filed a tax return, the IRS does not know to send payment.

Here are some pertinent Economic Impact Payment facts:

  • The payment is a refundable credit on the individual’s 2020 income tax return.  A refundable credit is, for all practical purposes, Free Money from the government (or more accurately, from taxpayers).  You do not have to owe tax to receive it, and you do not have to pay it back.
  • The IRS is sending this payment in advance based on tax returns filed in 2019.  If a 2019 return is unfiled, the IRS will use 2018’s return.
  • If advance payment is not received, obtain it by submitting a 2020 income tax return.
  • Individuals who qualify for the refundable credit have until April 15th (or July 15th, depending on the interpretation of the statute of limitations) of 2024 to file a 2020 tax return and claim their payment.
  • There has been little communication from the IRS regarding the advance payment process.  On April 10th, 2020, payment distribution started to those who had filed a 2019 return and had refunds directly deposited into their bank accounts.  I believe that 2018 filers with directly deposited refunds will follow. Then, paper checks will be printed and mailed to 2018 and 2019 filers for whom the IRS lacks banking information.
  • Individuals who receive Veteran Benefits, Social Security Retirement, Social Security Disability, or Railroad Retirement will all receive payment.  For non-income tax filers, the advance will arrive in the same manner as their benefits.
  • A tool on the IRS website allows those who have filed tax returns to check on their payment status and to add or change their banking information.  Here is a link to the Get My Payment Tool.
  • Another tool on the IRS.gov allows nonfilers to complete a simple return to receive their payment.  Use this tool to assist the homeless in collecting their payment. Here’s is a link to Non-Filers Enter Payment Info.  Many tax software companies have also created a basic-return function, so preparers can a file basic nonfilers return.

Helping the Homeless Receive their $1,200 Payment

These guidelines assume the reader is a member of a concerted effort to assist the homeless - be it a church, a mission, or a shelter program.  Below are some items to consider as you organize this effort. They are guiding principles to avoid unforeseen problems. They are not legal advice or an all-encompassing checklist.

  1. Formalize the outreach.  Have your board or organizing body formally approve the program.
  2. Create a list of procedures your organization will use to conduct this program.  Be sure to contact legal counsel for guidance. As you assist others in collecting these payments, you may be acting as their agent in some capacity.  You are also dealing with money and will likely become a custodian of funds that are not yours. I am not an attorney – Dot Your I’s & Cross Your T’s.
  3. This should be obvious to those who work with the homeless, but it needs to be said.  Economic Impact Payments may be a great tool to interact with and entice the homeless to come out of the shadows.  Keep in mind, however, that many of the homeless have problems with addiction. Others have emotional and psychological disorders.  Be aware of these challenges as you structure your program. To put it simply, be careful not to become an enabler of self-destructive behavior.  Consult with your attorney regarding how you can legally assist these individuals. Perhaps, you can contractually hold the funds as a custodian for these individuals and use the money to buy products for their benefit.  The Point: Do not hand out funds indiscriminately.  You may do more harm than good.
  4. Reach out to those in need.  Common-sense? Sure. But think this through.  How are you going to collect the information needed for a homeless individual to obtain their payment?  Here are the items the IRS will need to process each payment using their Nonfilers Enter Payment Info tool:
    • Full name, current mailing address and an email address
    • Date of birth and valid Social Security number
    • Bank account number, type, and routing number, if they have one
    • Identity Protection Personal Identification Number (IP PIN) you received from the IRS earlier this year if they have one (Note: very few will have this)
    • Driver’s license or state-issued ID, if they have one
    • For each qualifying child: name, Social Security number or Adoption Taxpayer Identification Number and their relationship to you or your spouse
  5. Most of those you are helping will not have a bank account or a stable address.  If they have neither, consider using your organization’s address as their Care/Of address to receive a physical check.  
  6. Unless you obtain permission from the IRS or authorities, do NOT use your organization’s banking account.  Also, unless you have a rigorous audit mechanism (preferably conducted by a third party), do not create a bank account to receive the payments.  Using a single bank acct for multiple refunds is an invitation for fraud, IRS inquiry or intervention, and problems later. There may, however, be existing programs that act as clearinghouses – receiving the funds as a trustee and distributing cash or prepaid debit cards to the proper recipients.  Check around (and please share this information so I can add it to this article).
  7. Receiving a physical check for a homeless client makes excellent sense until a person with no ID or bank account tries to cash it.  Consult your local banks and ask their advice before starting the program. They may have a creative solution.
  8. If you are disbursing payment directly to recipients, create a methodology to retain payment information.  If an individual lacks a picture ID, how will members of your organization know whose payment is whose? Taking a photo of each individual holding their personal information when you process their payment data may come in handy to verify identity.
  9. If you are going out to collect data, consider taking the following items.  A laptop with a hotspot internet capability to enter payment information on the spot.  A digital camera to record IDs and other information and each filer’s picture to verify identity when payment is delivered.
  10. Create procedures to verify the identity of recipients when printed checks are received.  Also, have a way to document that the correct recipient receives each payment. As much as society likes signatures as legal documentation, a photo of the individual holding the payment may be more convincing.
  11.  Reconcile and Document:   Develop a methodology to track all checks received and distributed.  These procedures should be easily replicable and to find years later if questions arise.
  12.  Be aware of unclaimed property rules.  Most states have regulations regarding unclaimed property.  Funds not claimed by the proper recipients may require delivery to the state treasury, which will hold the funds for the recipient.  Be sure to learn the rules of your state and a procedure to track remittance should you locate the owner.

Summary and Invite

Thank you for reading this article.  Creating a plan to assist the needing and homeless with their $1,200 economic impact payments is a little more involved than merely gathering their money and handing it out.  We hope this article helps you organize this worthwhile effort, without dissuading you from making it.

While you’re on our website, please feel free to browse our articles, resources, and courses.  If there’s any topic you’d like to learn more about, please let us know.

All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.

Customers Say…