NTA Blog: The Value of “Superseding” Returns and Processing the Additional $500 Stimulus Benefit for Certain Non-Filers

April 29, 2020

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For the IRS, like much of the country, it seems like the focus in recent weeks has been “All COVID, all the time.” The IRS is playing a central role in administering the Coronavirus Aid, Relief, and Economic Security (CARES) Act and other federal relief efforts, most notably by issuing Economic Impact Payments (EIPs) to more than 150 million individuals. The legal, technological, and practical challenges the agency is facing are enormous, and the IRS has moved rapidly, skillfully, and creatively to tackle these challenges, albeit hitting some processing bumps in the road.

Notwithstanding the IRS’s best intentions and efforts, taxpayers continue to face significant challenges. One month after the enactment of the CARES Act, the IRS has issued 122 million payments for a total of 207 billion dollars. However, some eligible individuals have not received the correct amounts, some deposits have been sent to discontinued or closed bank or financial accounts, and some mailing addresses will still need to be updated. Taxpayers have also complained about the IRS portal, “Get My Payment.” Nevertheless, more than 100 million people to date have successfully verified the status of their payments, and more than 8.9 million people have provided bank or financial account information to accelerate their receipt of payments. That is no small feat. The IRS continues to try to remedy any issues that arise, while keeping an eye on preventing fraud. Yet there are many tax issues unrelated to EIPs that taxpayers continue to struggle with as well.

In today’s blog, I will highlight several topics:

TAS’s Coronavirus Information for Taxpayers. To supplement information about Coronavirus-related issues on IRS.gov, TAS has created a web page that provides information on the Economic Impact Payment, the IRS’s “People First Initiative,” Filing and Payment Relief, Business Tax Relief, Net Operating Losses, Retirement Plan Provisions, International Coronavirus Relief, and Tax Processing Updates. This information is available on the TAS website.

The Value of a “Superseding Tax Return.” Most taxpayers (and some tax professionals) have never heard of a “superseding tax return,” but taxpayers may benefit from filing one, assuming the IRS can process them quickly and properly. A quick primer: Many taxpayers overpay their taxes, whether through withholding or estimated tax payments. Through April 17, the IRS had processed 107 million tax returns and issued 81 million refunds. Most taxpayers who overpay elect to receive a refund, but some taxpayers elect to have overpayments applied against the tax they owe for the following year. Here, that means taxpayers who have filed 2019 tax returns and have elected to apply the 2019 overpayments against their 2020 tax liabilities. Once made, this credit election is irrevocable — which means the taxpayer ordinarily cannot later ask the IRS to refund the overpayment before filing a 2020 tax return.

During normal economic times, taxpayers do not think about revoking this credit election. But this year, some taxpayers who elected to apply 2019 overpayments against 2020 tax did so before the Coronavirus affected the economy; these taxpayers may have since been rendered unemployed or insolvent, or they may be earning less (taxable) income than they expected. As a result, they probably will owe less tax than they anticipated for 2020, and they need to get back their 2019 tax overpayments now to help meet their basic financial needs.

That’s where the value of a superseding return comes into play. If a taxpayer files a second return after the filing deadline, it is considered an “amended return.” Taxpayers cannot reverse an election to apply 2019 overpayments against 2020 tax on an amended return. But if a taxpayer files a second return before the filing deadline (i.e., July 15 this year or October 15 on extension), the second return “supersedes” the first return. The second (superseding) return is treated as the original filed return, and the taxpayer may elect to receive the overpayment as a refund.

For business entities, this process should work relatively smoothly because superseding corporation and partnership returns may be e-filed by checking the superseding return box on the electronic submission. Refunds claimed on electronically filed returns and transmitted via direct deposit are often paid within a week. In the best of times, it takes four to six weeks for taxpayers to receive a paper check. Due to current circumstances, the issuance of paper checks may be delayed. A direct deposit is the quickest method to receive overpayments.
 
For individuals, the process takes longer. Superseding individual returns (Forms 1040) must be filed on paper and mailed to an IRS processing center. Paper returns are subject to processing delays and a greater risk of transcription errors. As the IRS processing centers were closed to protect the health of employees, documents sent to the IRS through the mail were not being opened. As the processing centers re-open, we anticipate delays in processing the backlog of paper returns and correspondence. Even so, filing a superseding return to request the overpayment be refunded now will generate the refund payment in 2020 rather than 2021. Providing bank or financial institution account information will further speed up the payment by four to six weeks. It is my understanding that paper returns will be processed in the order received, so there is no reason to wait.

I’m highlighting this issue to raise awareness that the filing of a superseding return may be a useful option for taxpayers (individual or business) who have hit hard times they didn’t anticipate when they filed their original returns. And within the IRS, I will be urging that paper returns be processed as quickly as possible after employees are safely able to return to work.

Issuing $500 Child Benefit to Non-Filers. Subject to income limitations, the CARES Act authorized EIPs of $1,200 to each eligible (adult) individual and an additional $500 for each eligible child. For individuals who have filed 2019 or 2018 tax returns, the IRS has a record of dependents listed on those returns, so it generally knows if a taxpayer is eligible to receive one or more additional $500 child benefits. The CARES Act provides that many taxpayers without a return filing obligation in 2019 or 2018 are eligible to receive EIPs. This includes individuals whose incomes are below the filing threshold (i.e., non-filers) but receive Social Security benefits, Railroad Retirement benefits, Veterans’ Compensation and Pension benefits, and Supplemental Security Income (SSI).

The IRS is sending the $1,200 adult EIP to these populations, but absent a filed tax return, it has no way of knowing who has one or more qualifying children and is eligible to receive the additional $500 child benefit. To obtain this information, the IRS has created a portal titled, “Non-Filers: Enter Payment Info Here.”

Now, here is the source of some taxpayer frustration: The IRS faced a Hobson's choice. Hold up all payments while confirming possible dependents or provide a short window of time allowing a small number of Social Security recipients (possibly 2 percent or less) the opportunity to provide the information before issuing all payments to this group of individuals. Although the IRS, the press, and the April 15 NTA Blog all highlighted this short window of time, most Social Security recipients not surprisingly do not closely follow IRS news. As a result, frustration with the IRS’s Monday, April 20, “special alert” stating that non-filers who receive Social Security benefits would have to enter dependent information into the non-filer portal by Wednesday, April 22, at 12 p.m. Eastern time to receive the $500 child benefit has been raised. The consequence of missing that window likely is having to wait until next year to receive the $500 child benefit by filing a 2020 tax return during the 2021 filing season. The alert said recipients of veterans’ benefits or SSI will have “slightly” more time to enter dependent information into the non-filer portal. The IRS subsequently announced this deadline will be next Tuesday, May 5. Please urge all veterans and SSI beneficiaries to use the non-filer portal if they have dependents and have not filed a 2019 or 2018 tax return.

Most Social Security recipients rarely receive or read IRS press releases, so issuing the special alert highlighting the remaining two days’ notice of actions required to receive the additional payment this year caused frustration for affected individuals. That’s understandable, and I will offer my suggestions below. But I do want to acknowledge that the IRS had a reason for imposing a short deadline. The IRS is concerned it will not be able to make a second round of payments this year (i.e., once it pays out $1,200 to a taxpayer, it may not be able to process and pay a supplemental claim for $500 child benefits this year). At the same time, the significant majority of Social Security recipients will not be claiming any additional child benefits.

Therefore, as noted above, the IRS had to make a difficult decision. If it made the $1,200 payments to Social Security recipients quickly, some recipients eligible for $500 child benefits will not receive them until next year. But if it provided Social Security recipients more time to enter dependent information, all EIPs to Social Security recipients will be delayed. So, the approach the IRS took with respect to Social Security recipients was an attempt to strike a balance. I should emphasize that this issue only arises with respect to recipients of these benefits who did not file a 2019 or 2018 tax return. If a return was filed, the IRS generally has the dependent child information.

While I understand the IRS’s reasoning, I have two concerns:

  1. Some taxpayers who miss the deadline for entering dependent information are experiencing economic hardships. Therefore, if there is any way that Congress can provide a solution or the IRS can develop a process to make supplemental payments this year, it should do so. In some cases, non-filers may be caring for multiple children, so the benefit may be $1,000, $1,500, or possibly more.

  2. Individuals with incomes below the filing threshold are not in the habit of filing tax returns and some will not think to do so, which means they won’t receive the child benefits next year either. Some may simply not know they need to file a return, and others may not know how to proceed; another group of taxpayers may not be aware of free tax preparation options or may not want to bother with hiring and paying a preparer.

For these reasons, I will be encouraging the IRS to continue to evaluate the feasibility of making a separate payment of EIP child benefits to qualifying individuals this year. And if you’re reading this blog and know of individuals who receive veterans’ benefits or SSI and have dependent children, please let them know that (i) if they have filed a tax return for 2019 or 2018, they don’t need to do anything, and (ii) if they have not filed a tax return in the last two years, they should use the non-filer portal by Tuesday, May 5, to receive the child benefit.

Word of Caution for Taxpayers: Don’t Fall Prey to Scams


I can’t emphasize enough the IRS’s recent warnings to the public: The IRS will never call or email you about these payments and will never call to ask you for personally identifiable information, including bank account information. Taxpayers should be very leery of any emails or other online communications promising faster refunds or Economic Impact Payments, as these are likely scams.


The IRS is continuing to develop and refine its procedures for issuing Economic Impact Payments. For the most current information, visit IRS.gov. 

The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.