Here’s what led to the judge’s ruling.
The Coronavirus Aid, Relief, and Economic Security Act (Cares Act) provides economic impact payments of up to $1,200 for individuals and up to $2,400 for taxpayers filing a joint tax return. The law also includes an extra $500 for each child who was under 17 at the end of 2019.
The Cares Act specifically lays out who is and who isn’t entitled to receive a stimulus payment. The law does not explicitly preclude payments to incarcerated individuals.
The IRS issued close to 85,000 payments to incarcerated people totaling $100 million, according to a June report by the Treasury Inspector General for Tax Administration (TIGTA). This was the same TIGTA report that raised concerns about stimulus payments sent to deceased individuals.
The IRS then flip-flopped and announced on its website in a FAQ that an incarcerated individual was not eligible for a stimulus payment. The agency asked correctional facilities to intercept payments and released information on irs.gov telling incarcerated individuals and their spouses that if they got a payment, they needed to return the money. That’s when many prisoners signed on to a class-action suit to demand the payments they were entitled to receive.
“There is no basis in law or fact for the IRS to disallow these payments,” said Nina Olson, a former taxpayer advocate, who is now executive director of the Center for Taxpayer Rights.
Leonna Abraham Brandao’s 52-year-old son is serving a life sentence for murder in a Massachusetts prison. She says the $1,200 could help with the hefty telephone charges her son has to pay so that she can stay in contact with him. She cannot visit right now because of covid-19.
“People in prison are being charged money for a lot more things,” Brandao said in an interview from her Massachusetts home.
Unless the Trump administration wins an appeal, the judge said the government has to reconsider reissuing payments to incarcerated individuals that were withheld, intercepted, or returned, said Kelly Dermody, a partner with San Francisco-based Lieff Cabraser Heimann & Bernstein, one of the law firms representing the class-action members.
“As a purely legal matter, this lawsuit stops executive agencies from improperly rewriting congressional legislation to suit whatever whim they might have,” Dermody said in an interview. “As a human matter, this case addresses the devastating intersection of poverty, mass incarceration and toxic health outcomes, which disproportionately affect Black, Indigenous, Latinx, nonbinary and transgender people. Excluding from assistance the people and their families most at economic and health risk from covid-19 is unspeakably cruel, as well as being illegal under the authorizing statute.”
This case also benefits people who have been incarcerated and did not previously file a claim because the IRS told them they were ineligible, Dermody said.
The challenge now is to get information out to eligible incarcerated individuals who weren’t automatically sent an economic impact payment because they weren’t required to file a tax return for 2018 or 2019. The IRS used information from those tax years to quickly disburse stimulus payments.
In another development that impacts people in correctional facilities, the IRS has set a new deadline of Nov. 21 for people who don’t normally file a tax return or don’t receive certain federal benefits to use the non-filer tool at irs.gov to register for a stimulus payment. The IRS created the online portal for individuals who are not typically required to file returns.
The economic impact payment is an advance credit for 2020. Under the Cares Act, payments must be made by Dec. 31. If people don’t receive a payment by the end of the year, they still have an opportunity to get the stimulus funds. However, they won’t see the money until they file a 2020 federal return next year.
Many incarcerated individuals are not allowed access to a computer, so they would have to file a paper return. However, the IRS only extended the deadline for use of the online tool. This means that people covered by the lawsuit who did not file a 2018 or 2019 tax return will have to rush and postmark a paper return by Oct. 15 to receive a stimulus payment this year.
If you know someone who may be impacted by the court case, go to caresactprisoncase.org. On the site is information about the class-action and how incarcerated people should fill out IRS Form 1040 to get a stimulus payment, including where to add the personal corrections number that is given to each prisoner so that the payment is sent to the right place.
I volunteer to teach financial literacy in several prisons in Maryland, so I know firsthand that many incarcerated individuals depend on financial assistance from relatives for personal care items like deodorant, shampoo and toothpaste. The stimulus funds would relieve some of the financial pressure on their friends and family, who are very likely struggling themselves under the current economic crisis. I also know that maintaining contact with family helps reduce recidivism rates.