IRS Struggles to Implement Provisions of the CARES Act
The economic impact of the COVID-19 pandemic cannot be understated, and much of the fallout continues to play out without an agreed-upon end in sight. As a lifeline to households and businesses who are financially struggling, Congress passed the CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act, in March. This bill apportioned an astounding $2.2 trillion of relief for the U.S. economy, giving a much-needed injection of stimulus to those who were hit the hardest.
However, the speed and scale at which the CARES Act was needed meant that it was difficult for all the provisions to be implemented 100% as intended. In particular, the IRS has struggled to implement certain provisions of the CARES Act, which unfortunately led to some delayed funds, even diverting from where they needed to go. Here’s what you need to know.
What Was Included in the CARES Act?
To start with, the CARES Act came with a bevy of spending and stimulus funding to go directly to where the U.S. economy was hurting. Of the $2.2 trillion allocated to the CARES Act, the provisions included:
- $300 billion to go as one-time, lump-sum payments to individual Americans to help them keep up with bills and return spending to the greater economy
- $260 billion to increase the available unemployment benefits for those whose jobs were displaced by the pandemic
- $669 billion for the Paycheck Protection Program to provide loans to small businesses to help them keep employees paid and operations running
- $500 billion in aid to larger corporations hit hardest by the fallout, and
- $340 billion to go to state and local governments who most needed assistance.
Provisions of the CARES Act that Have Stalled with the IRS
The challenges the IRS has faced in trying to help direct these funds have been immense, and obviously, it all starts with the mitigation efforts to prevent COVID-19 spread bringing IRS offices to a close, forcing all the work to shift remotely with little warning.
Beyond those operational challenges, the IRS has had to tackle some additional issues. For one, millions of Americans each year send in their tax returns in paper form and are dependent on getting a speedy refund from the government. But, because of the changes in operations, the IRS had to suspend processing these paper tax returns, which has kept funds out of households in need.
For the payments being directed from the CARES Act to Americans, the volume of checks going out was so great that inevitably a small percentage of errors arose. Whether that’s payments not being directed to the right address, not being in the expected amount, or otherwise, the result is that citizens are delayed in getting their needed funds. And worse, those delays are not expected to be resolved until their 2020 taxes are filed, and they can be squared away then. That delay undermines the intent of the payments in the first place.
Another important provision of the CARES Act was the Employee Retention Credit (ERC), which was a refundable tax credit based on how many employees couldn’t be paid, and the change in expected revenue coming in. These determinations have been quite complex, and many small businesses struggled to have the time or resources available to get expert help involved. So, some unfortunate parties that were supposed to be supported ASAP by the CARES Act found themselves in a painful delay.
These are just some of the complexities and issues that have arisen with such a massive and new tax provision pushed through in quick order. If you’re struggling to understand what you may qualify for or how to best make use of CARES Act provisions meant for you, you should consult a professional. The tax experts at Tobin & Collins can help. Our tax experts are ready and able to assist you in evaluating your situation, so get in touch with us to get started today!