Covid19-Social Security

[10409000]

Question. IRs website indicates a person that receives social security income and normally doesn't file a tax return. Is required to file a "simple tax return" in order to get the stimulus credit. I offered to do a few of them for free for a few people however when I entered the tax return in proseries it indicates I cannot file a tax return with zero value. So im confused. Are people on social sec supposed to file taxes or will they just automatically get a stimulus? I read one post on the news website that they do not have to file.. but the irs website indicates they have to file. 

[itonewbie]

That is a mistake on the IRS' part and is probably getting people confused.  They shouldn't have to file a return to be eligible.

§6428(f) is the subsection that deals with Advance Refunds and Credit of Recovery Rebates.  Paragraph (5)(b) specifically provides that the IRS will use information from the SSA-1099 to issue these payments where no returns are filed by these recipients.

6428(f)(5) Alternate taxable year.—
In the case of an individual who, at the time of any determination made pursuant to paragraph (3), has not filed a tax return for the year described in paragraph (1), the Secretary may—

6428(f)(5)(A) apply such paragraph by substituting "2018" for "2019", and

6428(f)(5)(B) if the individual has not filed a tax return for such individual's first taxable year beginning in 2018, use information with respect to such individual for calendar year 2019 provided in—

6428(f)(5)(B)(i) Form SSA-1099, Social Security Benefit Statement, or

6428(f)(5)(B)(ii) Form RRB-1099, Social Security Equivalent Benefit Statement.

[rbynaker]

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@itonewbie wrote:

That is a mistake on the IRS' part and is probably getting people confused.  They shouldn't have to file a return to be eligible.

§6428(f) is the subsection that deals with Advance Refunds and Credit of Recovery Rebates.  Paragraph (5)(b) specifically provides that the IRS will use information from the SSA-1099 to issue these payments where no returns are filed by these recipients.

6428(f)(5) Alternate taxable year.—
In the case of an individual who, at the time of any determination made pursuant to paragraph (3), has not filed a tax return for the year described in paragraph (1), the Secretary may—

6428(f)(5)(A) apply such paragraph by substituting "2018" for "2019", and

6428(f)(5)(B) if the individual has not filed a tax return for such individual's first taxable year beginning in 2018, use information with respect to such individual for calendar year 2019 provided in—

6428(f)(5)(B)(i) Form SSA-1099, Social Security Benefit Statement, or

6428(f)(5)(B)(ii) Form RRB-1099, Social Security Equivalent Benefit Statement.

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I'm starting to second-guess myself on this now.  It does say "may" instead of "shall".  So it could be that the Secretary is simply choosing not to apply that section.  Time will tell.

[itonewbie]

But it wouldn't make sense because the Code is written by Congress.  As usual, it grants authority to the Secretary to prescribe regulations.  If that is just an option, they could have easily left out the statutory language and left it to the IRS for how they want to implement it.

That's why I am still of the opinion that this should be implemented.  As you said, time will tell.

[rbynaker]

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@itonewbie wrote:

But it wouldn't make sense because the Code is written by Congress.  As usual, it grants authority to the Secretary to prescribe regulations.  If that is just an option, they could have easily left out the statutory language and left it to the IRS for how they want to implement it.

That's why I am still of the opinion that this should be implemented.  As you said, time will tell.

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I agree.  I just didn't pay attention to the word "may" the first dozen or so times I read it.  I dismissed the IRS FAQ saying that SSA recipients should file a "simple" return in order to get paid, thinking that's not what Congress said.  But now I'm more open to the possibility that it's correct if we allow the possibility that the IRS has a choice.

Another possibility I considered is that the whole 2018 / SSA-1099 use might just refer to the method of disbursement.  After rereading that section another half-dozen times though, I concluded that it should apply to both the timing and manner of payment.  While SSA has bank info, the SSA-1099 itself provides no bank info.  It's only purpose in implementing this law would be to provide information regarding qualifying income (and possibly a current mailing address for the required notice in 6428(f)(6)).

[itonewbie]

My interpretation also is that the info from SSA-1099 only determines the individual's eligibility and the address to which the check should be mailed.  If these individuals would like to receive the payment by direct deposit, they should still submit it on the IRS' website once it's up and running.

[rbynaker]

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@itonewbie wrote:

My interpretation also is that the info from SSA-1099 only determines the individual's eligibility and the address to which the check should be mailed.  If these individuals would like to receive the payment by direct deposit, they should still submit it on the IRS' website once it's up and running.

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I very much enjoy our morning (for me) discussions.  Now I'm off to a 4-hour webinar on this stuff.

[Just-Lisa-Now-]

So we think the IRS will be able to pull records from 2 different places for these stimulus checks?   

Some of my MFJ clients with SS actually exceed the 150k mark (with all their pensions and interest/divs) and would get reduced stimulus based on the tax return.   

Do we think their systems are able to weed out the people with SS that file returns vs those that don't in in the SS database?

[itonewbie]

Tony Nitty who regularly contributes really geeky tax articles to Forbes is also of the view that no returns will need to be filed by these recipients. (https://www.forbes.com/sites/anthonynitti/2020/03/25/congress-reaches-agreement-on-a-coronavirus-rel...)

Having said that, the Center on Budget and Policy Priorities already called on the IRS to issue a public statement about the confusion the newsletter has caused, pointing out specifically that Congress, having learned from the mistakes in 2008, deliberately included the language in the code section to ensure payments can be made without these recipients filing returns, which could create unnecessary delays and burdens (to both the recipients and the IRS).

https://www.cbpp.org/blog/social-security-beneficiaries-shouldnt-have-to-file-a-tax-return-to-get-st...

Nothing is ever simple when it comes to taxes... this is just another proof.

[itonewbie]

@Just-Lisa-Now-  No.  These folks would or should have filed a return.  It's only for those who haven't filed for 2018 or 2019 (likely because they don't have a filing requirement).  Of course, there could be people who are delinquent and that cannot be helped.

[itonewbie]

@rbynakerSame here.  Have a good time! 😁

[carylabbott]

At this point my Pro Basic software won't insert the bank info into the return if a refund isn't owed on the current return.  Trying to do this for elderly client - very frustrating