Millions of People Face Stimulus Check Delays for a Strange Reason: They Are Poor

[alwaysinasnit]

https://www.propublica.org/article/millions-of-people-face-stimulus-check-delays-for-a-strange-reason-they-are-poor?utm_source=pocket-newtab

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The stimulus problems are part of a constellation of pain faced by the poor in accessing CARES Act money, from the possibility that banks could seize the money to pay off debts to advocates’ fear that, when paper checks arrive, the check-cashing industry will snatch a hefty chunk.

The tax prep business is built on a complex infrastructure designed to extract fees that many customers cannot afford. When the government tried to navigate that system to speedily get cash to its citizens, it ran into big problems.

The IRS estimates that it will send the $292 billion in CARES Act money to 171 million Americans. The first wave of payments sent out last week was targeted to less than half of those eligible: 80 million Americans whose 2018 or 2019 tax refunds had been directly deposited. To disburse most of the remaining payments, the agency is planning to mail 81 million paper checks bearing the president’s name, according to an IRS budget document.

But for a large portion of the 80 million people the IRS tried to reach last week, “direct deposit” is a bit of a misnomer. Each year, the tax refunds of more than 20 million Americans, including many of Citi Tax’s customers, take a detour. These customers don’t pay their tax preparation fees upfront, instead opting to have the fee taken out of their refund. Because regulations prohibit tax prep companies from receiving refunds directly, a special, temporary account is created at a bank that plays the middleman. The bank takes out whatever fees are owed and then passes the remainder on to the customer.

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[MichMan]

1. I don't understand why people use these tax preparation services

"A low-income, single mother with two children pays about $360 to have her taxes prepared at H&R Block, according to a company pricing chart. With a refund transfer ($40), the toll rises to $400. The equivalent cost at Jackson Hewitt, the second largest chain, would be $610, according to an estimate provided by a company employee."

These are the people least able to afford a fee in the first place.

The forms are very simple to fill out for the vast majority of lower income folks, and every community has volunteers to help the poor and elderly with free help. I have never paid anyone to fill out a tax form for me, even when I was 20 making minimum wage.

[Thunderbeast]

2. Every year, I prepare my moderately complex return.

Used to use "TaxAct", but started doing it the old fashioned way with paper and a calculator.

Every year, the IRS advises me that I screwed something up, and re-calculates the return. Sometimes in their favor, sometimes in mine...whether or not I used the program.

The whole process is inefficient. Maybe a straight payroll and VAT system would be less expensive for everyone.