Automatic Economic Impact Payments: Potential Problems for Taxpayers Receiving Social Security Benefits Through Representative Payees
Since it began in 2020, the IRS has issued over 160 million Economic Impact Payments (EIPs) to eligible Taxpayers. The majority of eligible taxpayers received the EIPs automatically.
This payout was simple for taxpayers who filed tax returns- the IRS used the information taxpayers provided on their return to issue the EIPs. However, sending EIPs to non-filing taxpayers who receive Supplementary Security Income (SSI) was not so simple. SSI beneficiaries typically do not file tax returns, and so the IRS needed additional information to automatically send the EIPs.
To solve this problem, the IRS partnered with the Social Security Agency (SSA) to issue EIPs to eligible SSI beneficiaries. Using the information provided by the SSA, the IRS was able to issue the EIPs to the same accounts that SSI beneficiaries used to receive their payments from the SSA.
This automatic payment distribution created potential challenges for SSI beneficiaries that received their benefits through representative payees. The SSA appoints representative payees to help SSI beneficiaries manage their SSI payments. For SSI beneficiaries with representative payees, the EIPs were sent to the representative payee instead of directly to the taxpayer.
This poses two potential problems for SSI beneficiaries who were eligible for the first two EIPs. First, it is not clear how frequently the IRS and the SSA exchanged information about eligible SSI beneficiaries. If an SSI beneficiary removed their representative payee and the IRS was not updated, it appears that the beneficiary’s EIPs would still be sent to the removed representative payee. Secondly, the EIPs are not Social Security benefits. As such, the SSA had no authority to investigate misuse of EIPs by representative payees. It is not clear what, if any, avenues for relief the IRS or SSA provide to an SSI beneficiary who believes that their EIP was misused by their representative payee.
Nathan DanishLaw Student Intern