Stimulus relief payments to federal beneficiaries who do not have recent tax returns on file with the IRS or who did not use the IRS online “non-filers tool” had been delayed, resulting in criticism and concern among would-be recipients.
In total, about 127 million payments worth $325 billion have been distributed over the past three weeks. The American Rescue Plan provides for payments of up to $1,400 for eligible individuals and $2,800 for couples filing joint returns. Dependents, regardless of age, also receive $1,400 each.
The IRS had said it would automatically send economic impact payments, which is what the agency calls the stimulus payments, to people who did not file returns but who receive Supplemental Security Income (SSI), Social Security retirement, survivor or disability (SSDI), Railroad Retirement, or Veterans Affairs (VA) benefits. But many of these federal beneficiaries, including nearly 30 million Social Security and SSI benefit recipients, have been waiting for news about their payments.
“I am a 69-year-old widow living on SSI widow’s benefits,” a Florida woman said by email. “I can use the extra money, and I hear on the news every day how many people in my area have received their third stimulus payment. What is going on? I can really use this money.”
The wait is coming to an end if all goes as planned, the IRS and Treasury said. Now that the IRS has the information it needs from the Social Security Administration, the majority of stimulus payments to federal beneficiaries will be disbursed electronically — through direct deposits or to existing Direct Express cards, which are prepaid debit cards used to deliver federal benefits.
However, stimulus payments for VA beneficiaries, who do not regularly file tax returns, could be delayed until mid-April. The agency said it is reviewing data for VA benefit recipients and expects to determine a payment date and provide more details soon.
“We know how important these payments are, and we are doing everything we can to make these payments as fast as possible to these important individuals,” IRS Commissioner Charles Rettig said in the statement.
Here’s a roundup of other announcements the IRS has made over the past several days.
— Stimulus payments for federal beneficiaries. The payments are automatic, so there’s nothing beneficiaries have to do. However, some federal benefit recipients still may need to file 2020 tax returns to claim the economic impact payments for qualified dependents. The IRS otherwise will not know to disburse the payments for the dependents.
Also, be aware that the form of payment may be different from in earlier stimulus rounds. So, be sure to check your mail for either a check or prepaid debit card.
— Covid masks now covered. Personal protective equipment — such as masks, hand sanitizer and sanitizing wipes used to prevent the spread of the coronavirus — is now deductible as a medical expense, the IRS announced last week.
The IRS said taxpayers can use funds in their health savings accounts (HSAs) or flexible spending account (FSAs) to buy paper and cloth masks. Hand sanitizer and surface cleaners that are used to prevent the spread of the virus also are eligible. With an FSA and HSA, you can set aside money, pretax, to pay certain qualified health expenses.
The contribution limit for an employee who chooses to participate in an FSA is $2,750 for 2021. Contributions are not subject to federal income tax, Social Security tax or Medicare tax.
Health savings accounts are linked to high-deductible health plans (HDHPs), and, like FSAs, they also can be used for various out-of-pocket expenses. The maximum amount you’re allowed to contribute to an HSA for 2021 is $3,600 as an individual or $7,200 as a family. People 55 or older can contribute an extra $1,000 annually to an HSA.
— IRA contribution deadline extended. In other news, the IRS said it is giving individuals additional time to make 2020 contributions to their individual retirement accounts, such as an IRA or Roth IRA. The deadline is now May 17, as the IRS has extended the tax season for individuals to May 17.
The annual IRA contribution limit for 2020 is $6,000, plus an additional $1,000 for taxpayers 50 and older.
People funding health savings accounts and Coverdell education savings accounts also have until May 17 to make 2020 contributions. Assuming you meet the income requirement for a Coverdell ESA, the annual contribution limit is $2,000 per beneficiary.
— Covid-related student financial aid not taxed. The IRS announced Tuesday that emergency financial aid grants made by a federal agency, state, Indian tribe, higher education institution, or scholarship-granting organization will not have to be included in a student’s gross income if related to the pandemic.
— Unclaimed refunds. By law, taxpayers have just three years to claim refunds. For 2017 returns, that would have been April 15. But now people have until May 17 to file 2017 returns and claim any refunds due.
There’s a lot going on this tax season. I highly recommend you regularly check irs.gov for updates.