IRS rebate checks: more problems

The Internal Revenue Service continues to have system problems related to economic stimulus rebate checks. Given a program of this magnitude, in which the IRS will mail 130 million checks, unexpected problems caused by computer glitches are not surprising.

IRS rebate checks: more problems

The Internal Revenue Service continues to have system problems related to economic stimulus rebate checks. Given a program of this magnitude, in which the IRS will mail 130 million checks, unexpected problems caused by computer glitches are not surprising.

National media have reported at least four distinct issues connected with the stimulus program.

1. Missing rebates for kids. Back in May, the IRS didn't send 350,000 payments due to confusion and bugs with tax software. Here's the official IRS explanation (bottom of page):

The Internal Revenue Service will mail out approximately 350,000 additional economic stimulus payments starting in early July after discovering that some tax returns were improperly filed and did not capture the information needed to generate the $300 in qualifying child payments.

In some instances, taxpayers did not check the proper box to trigger the $300 child payment. In other instances, a few tax software products primarily used by tax professionals did not capture the proper information needed for issuing the child stimulus payment.

2. Direct deposit delays. Anyone deducting his or her tax preparation fee from a direct deposit refund must wait as much as two months to receive a paper check. A software process bug appears responsible for this situation. The Orange County Register reports:

The delay affects anyone who had their tax preparation fee deducted from their direct deposit refund or who got a refund anticipation loan as an advance on their refund. Among those affected are H&R Block clients and people who used TurboTax’s refund transfer.

These tax preparation services set up a temporary account with a third party bank to receive the IRS refunds. The third party banks deducts the tax preparation fees or the amount of the refund anticipation loan then deposits the remainder into the taxpayer’s bank account. Because the third party bank account is temporary for that one refund transaction, the IRS has no place to electronically send the subsequent rebate payment.

3. Deposits into wrong bank account. According to WITN television in North Carolina:

About 1500 payments went into the wrong bank accounts. The IRS says they discovered the problem and will send out paper checks in July to those taxpayers.

4. Duplicate checks. MarketWatch reports that some taxpayers have received two checks instead of one:

One taxpayer, a technical writer in Chicago who preferred not to give her name, said she'd already deposited her $600 stimulus payment when a second check arrived in the mail, also marked "stimulus payment" and also for $600.

In fairness to the IRS (can't believe I just said that), MarketWatch acknowledges it's an isolated problem. I wonder whether the problem is real:

In an unscientific survey of a handful of tax preparers nationwide, MarketWatch found just one who said a client had received two payments by mistake.

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