Those who received the “clawback rebate” credits would reduce their loans to meet unpaid federal and state taxes, social security and veteran affairs debts, student loan debts, and child support obligations.
Highlighting the problem: National Tax Attorney Erin Collins pointed out the unequal treatment in JanuaryThat said, millions of people could cut their loans, especially those most in need of relief due to the coronavirus pandemic, including veterans, social security beneficiaries and students.
She urged the IRS to use its own authority to fix the problem, at least for those who have federal tax debts, and the agency has agreed to do so. Collins wrote on a blog on Monday.
“It pledged to do this as soon as possible,” she wrote.
Limited range: However, she noted that the change doesn’t cover those who have already filed or filed their 2020 returns before the IRS can make a necessary change to their computer programming. It will also not affect most categories of debt.
The IRS continues to be required by law to “make reimbursements to pay off numerous other categories of debt, including government tax liabilities, overpayments of unemployment insurance benefits, and overpayments of certain federal benefits,” Collins wrote.
“As a result, there remains a significant difference between treating taxpayers who have received prepayments and treating taxpayers who have not received prepayments and claim their services as RRCs.”
The same applies to new payments: Congress also didn’t change the rules for debt deduction in another round of stimulus payments that it approved earlier this month.
“Thus, the legal system in its current state will perpetuate inequalities … through the 2022 registration season,” she wrote.