Stimulus Payments: How MFS and ITIN Affect Clients’ Stimulus Checks

This content is for the first stimulus relief package, The Coronavirus Aid, Relief and Economic Security Act (CARES Act), which was signed into law in March 2020. For information on the second stimulus relief package, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, please visit the second post here.

By now, tax practitioners should be familiar with the provisions in the provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including Economic Impact Payments to taxpayers as a result of COVID-19. According to the National Taxpayers Advocate service, as of April 29, the IRS had sent out payments to 150 million taxpayers, yet it’s likely you may have some individual clients who have not received their payment.

If this is the case, they can check their eligibility using the IRS Get My Payment tool. While the tool gives some information, you can also direct them to take several extra steps.

Payments for persons who do not need to file a tax return will be coming in the next few weeks. The IRS delayed payments to persons receiving federal Veterans Affairs (VA) benefits and/or Social Security income (SSI) to allow them time to disclose if they have qualifying children using the non-filer’s tool. The deadline for VA or SSI benefit recipients to submit information to the agency if they want money for their children to be included in the coronavirus relief payments they receive was May 5, 2020.

Those who can be claimed as a dependent for tax purposes, such as college students, are also ineligible for the payments, as well as a married couple where one partner has an Social Security number, and the other has an individual taxpayer identification number (ITIN) or no number (unless the taxpayer is in the military).

Taxpayers with an ITIN are not eligible for the stimulus payment in most cases. However, if they are married to a U.S citizen or legal permanent resident with a valid SSN, their spouse is eligible for a payment. The only exception is when two spouses file a joint tax return and either spouse is a member of the U.S. Armed Forces at any time during the taxable year, in which case only one spouse needs to have a valid Social Security number (SSN).

If you consider a legal permanent resident with a valid SSN who has a spouse with only an ITIN number and a J.S. citizen child under 16 year old, and they filed a joint tax return for 2019, none of them would receive the stimulus checks.

If your clients fall into the example above, don’t worry – there is another way to receive an Economic Impact Payment. If your clients have already filed their 2018 and 2019 returns, they have two options. The first option is to file as “married filing separately” (MFS) for the next tax year and receive the payment around this time next year. If your client needs their stimulus check now, they can file a second return for 2019 using the MFS status.

You may have not heard of a superseding tax return, so let me explain. If a taxpayer files a second return after the IRS deadline – July 15, 2020, or Oct. 15, 2020 for extensions, it is an amended return and needs to be filed on Form 1040X. However, if a second return is filed before the due date, it supersedes the first original return filed.

Before using a superseding tax return, first make sure filing a MFS return is beneficial to your clients. They may miss out on other credits or deductions by filing separately. If you decide that filing separately works best for your clients, the new return should be prepared and filed on paper.

The last consideration when taking this approach is the timeframe in which the return will be processed and the refund issued. The IRS is not currently processing paper-filed returns. But, by filing a second return, you will ensure that your clients receive their stimulus payments sooner rather than later.

Editor’s note: What if your clients received a stimulus payment, but the amount isn’t what they expected? Find out from the IRS why the Economic Impact Payment amount could be different than anticipated.