April 5, 2021 - Douglas Myser

IRS not seizing most stimulus checks. The Internal Revenue Service won't take a taxpayer's refund money to pay off any federal debts they owe if that taxpayer claims a 2020 stimulus payment on their tax return, according to a consumer watchdog inside the tax collection agency. This policy change provides "a needed lifeline to the country's most vulnerable individuals and families," National Taxpayer Advocate Erin Collins said, announcing the IRS decision this week. Without the fax, Collins said these people could have seen their stimulus check money unfairly eaten up by debts at the time they needed it most. But there is a catch, Collins notes in a blog post. The IRS  decision only prevents money being held back to pay federal debts such  as unpaid federal taxes or defaulted student loans. The decision does not apply to state debts, which include back taxes owed to a state or past child support. IRS not seizing most stimulus checks.

The IRS informed Collins office the Taxpayer Advocate Service, of its decision not to take money for federal debts, but the time frame on implementation is still being determined. At this point in time anyone who say they are owed their 2020 economic impact payment, also known as a stimulus check, must claim it as a "Recovery Rebate Check" on their income taxes. The IRS merged people's stimulus money into their tax refunds and as a result, the economic impact payment became subject to the same rules that allowed the IRS to seize the refund and pay down the taxpayers federal and state debts. That quirk set an unfair playing field for the people seeking their stimulus money now, Collins said. The people getting their economic stimulus payment during the initial distributions did not face the same offset rules, she noted.

When the IRS distributed the first round of $1200 stimulus checks, it only seized money for past due child support. The second round of $600 payments did not hold back money for past due child support.