Congress, IRS Prepare for Second Stimulus Payment

Summary

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WSJ Your Money Briefing

Episode Summary: Congress, IRS Prepare for Second Stimulus Payment

Date: July 24, 2020
Host: Charlie Turner
Guest: Rich Rubin, WSJ U.S. Tax Policy Reporter

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Overview

This episode focuses on the state of negotiations in Congress over a second coronavirus stimulus package, particularly the prospects for a new round of $1,200 stimulus checks, adjustments to unemployment benefits, and how the IRS is preparing to distribute potential payments. Reporter Rich Rubin provides insight into the major sticking points, differences between House and Senate proposals, and lessons learned from the first stimulus rollout.

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Key Discussion Points & Insights

1. State of Congressional Negotiations

• Congress is in the midst of negotiating a new coronavirus stimulus package, with the House and Senate far apart on key details.
• The House passed a $3.5 trillion bill in May, while the Senate has not yet agreed on its proposal (01:43).
• The main points of contention:
  • The scale and scope of unemployment benefits
  • Funding for COVID-19 testing
  • Details on direct payments and other tax-related measures
• Both sides are working toward having firm proposals before negotiations can move forward.

  Rich Rubin (01:43): "The two sides are still very far apart."

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2. Second Round of Stimulus Payments

• There is bipartisan support for a second round of $1,200 stimulus checks.
• The eligibility details are up for debate:
  • The House proposal would expand eligibility to include more recipients like adult dependents (e.g., college students, senior citizens who are dependents), mixed-status families, and more.
  • The Senate is likely to only expand to adult dependents, sticking to former income thresholds ($75,000 for individuals, $150,000 for married couples).

  Rich Rubin (02:34): "The House proposal does include more people, adult dependents... mixed status families... The Senate proposal is likely to only expand for those adult dependents and not go beyond that."

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3. Lessons from the First Stimulus

• The IRS processed the first round of payments at unprecedented speed, sending out 80 million direct deposits within a few weeks—much faster than in 2008.
• Challenges included:
  • Payments going to deceased people
  • Households with children missing child payments
  • Difficulty reaching individuals who don’t typically file tax returns but are eligible (e.g., Social Security and VA beneficiaries) (03:29).
• The IRS now has more complete information, making a repeat distribution potentially smoother.

  Rich Rubin (03:29): "The previous version in 2008 took months...They had 80 million payments, direct deposits out within a couple of weeks. That was a real significant accomplishment." Rich Rubin (04:27): "The more that the eligibility criteria for a second round of payments resembles the eligibility for the first round, the easier it's going to be... to just, you know, hit the repeat button."

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4. IRS Technological Preparedness

• Despite aging technology, the IRS is in a better position due to data collected during the first round (including 14 million new pieces of bank account information).
• IRS staff are now largely back at work as opposed to working remotely.

  Rich Rubin (04:35): "They collected 14 million pieces of bank account information...the IRS has that now and could theoretically move ahead relatively quickly."

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5. Reaching Low-Income and Non-Filers

• Many low-income households and people without regular ties to the IRS or federal agencies (such as non-filers, some immigrants, homeless individuals) have yet to receive payments.
• The IRS continues to face challenges in reaching these groups and updating their records.

  Rich Rubin (05:49): "One of the interesting things about this program is that they really set out to make it eligible for people who don't have much income or even any income."

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6. Expected Timeline for Payments

• The IRS is not yet providing specific timelines for future payments because implementation depends on congressional passage of new laws.

  Rich Rubin (06:28): "The IRS's job is to implement the laws that Congress gives them... They try to limit the information that they provide to the public in terms of setting expectations."

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7. Enhanced Unemployment Benefits

• $600/week enhanced unemployment benefits are set to expire at the end of July.
• There is little expectation of a seamless extension; a lapse is likely, potentially affecting millions of households.
• Key points of conflict:
  • Republicans see the $600 extra as a disincentive for returning to work; they want a reduction to replace ‘part’ of wages, not allow benefits to surpass former income.
  • Democrats argue the real barrier to re-employment is the pandemic itself, and support greater benefits as economic aid.

  Rich Rubin (07:17): "It seems like we're pretty well likely heading into a period where there's going to be some lapse..." Rich Rubin (07:30): "It's a big sticking point for Republicans who say that it's providing a disincentive for people to get back to work." Rich Rubin (07:36): "Democrats will argue that... the virus is the disincentive to go back to work."

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Notable Quotes & Memorable Moments

• Rich Rubin (02:34): "The House proposal does include more people, adult dependents... mixed status families…"
• Rich Rubin (03:29): "They had 80 million payments, direct deposits out within a couple of weeks. That was a real significant accomplishment."
• Rich Rubin (04:35): "They collected 14 million pieces of bank account information from people..."
• Rich Rubin (05:49): "They really set out to make it eligible for people who don't have much income or even any income."
• Rich Rubin (07:36): "We're like the virus is the disincentive to go back to work."

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Timestamps for Important Segments

• [01:43] – Big differences between House and Senate stimulus proposals
• [02:34] – Who would qualify for the second round of checks?
• [03:29] – How the IRS handled the first round of payments
• [04:35] – IRS technology and process improvements
• [05:49] – Challenges in reaching low-income/non-filers
• [06:28] – IRS position on payment timelines
• [07:12] – Status of enhanced unemployment benefits

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Tone and Style

The conversation is factual, informative, and conversational, reflecting the Wall Street Journal’s expert, direct tone. Rich Rubin provides analytical context, while Charlie Turner gives concise prompts that keep the discussion focused on takeaways for listeners’ personal finances.

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For listeners: This episode is an essential primer on how the next federal stimulus package may affect you, why negotiations are stalled, what’s different this time, and the logistical realities facing the IRS as millions await potential relief.

Transcript

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Representative]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Representative]

they need while increasing megastore profits. They deserve it, don't they?

[Consumer Advocacy Group Representative]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[Charlie Turner]

Here's your money briefing for Friday, July 24th. I'm Charlie Turner for the Wall Street Journal. Congress is hashing out the details for a new coronavirus stimulus package.

[Rich Rubin]

There's a whole bunch of moving parts in here. And we're just trying to get to the point now where even though those expanded unemployment benefits expire at the end

of the month, we're just trying to

get to the point where there's a Democratic proposal and a Republican proposal for them to negotiate.

[Charlie Turner]

How might the new package compare with earlier efforts? Our US Tax Policy reporter, Rich Rubin will tell us what to expect after the break. There's bipartisan support for a second round of $1,200 stimulus checks for American households. But what can we expect to emerge from Capitol Hill? And is the IRS prepared? Our US Tax policy reporter, Rich Rubin is here with the latest. So, Rich, it appears that Congress is likely to approve a new coronavirus stimulus bill for President Trump to sign. But the House and Senate are working on different proposals. What do we know about them? Walk us through the major differences.

[Rich Rubin]

So in the big picture, the two sides are still very far apart. The House passed a three and a half trillion dollar bill in the May, and the Senate has been kind of waiting to see what the situation is. And they don't yet have an exact plan on what they're going to do. They've been meeting amongst themselves among Senate Republicans and they've been talking to the administration and they're trying to come up with a consensus that they can then take and use as a starting point to negotiate with Democrats. And so the size of unemployment insurance, how much money goes for coronavirus testing, details on the payments that we'll talk about, other tax proposals. There's a whole bunch of moving parts in here. And we're just trying to get to the point now where even though those expanded unemployment benefits expire at the end

of the month, we're just trying to

get to the point where there's a Democratic proposal and a Republican proposal for them to negotiate.

[Charlie Turner]

Well, would these new proposals likely include

[Rich Rubin]

more people as far as the individual payments, yes, it looks like it. The House proposal does include more people, adult dependent. So like you can imagine college students, senior citizens who are on someone else's tax return, as well as mixed status families, households where some people are citizens and some are not or some people are work eligible and have Social Security numbers and some are not. That includes some illegal immigrants. But there's more than that. And then the Senate proposal is likely to only expand for those adult dependents and not go beyond that. The income limits are likely to be start phasing out at 75,000 for individuals and 150,000 for married couples, just like the earlier version did.

[Charlie Turner]

Let's talk about the first round of stimulus money from this past spring. The IRS faced some problems in getting the money out to taxpayers. Remind us of what happened.

[Small Business Owner]

Yeah.

[Rich Rubin]

So look in the big picture. This went really fast. Right. The previous version in 2008 took months before they got a first set of payments out. They had 80 million payments, direct deposits out within a couple of weeks. That was a real significant accomplishment. And so we shouldn't underestimate the importance of that. On top of that, after that, though, there were some issues. There were payments to dead people. There were some households with children who didn't get the payments for the children. It took a while for the IRS to kind of work with Social Security Administration and the VA to get information about people who don't file tax returns but have benefits coming from those agencies and are still eligible. But the key thing here is that the IRS has done a lot of that work. They have a lot of the information. And so the more that the eligibility criteria for a second round of payments resembles the eligibility for the first round, the easier it's going to be for them to just, you know, hit the repeat button.

Not it's not really that simple, but

basically that and get payments out faster.

[Charlie Turner]

Has the IRS made technological improvements as far as how to get these payments out?

[Rich Rubin]

Yes and no. I mean, I think the IRS technology is aging and it's got its issues. I think the real issue is they've got information. So the IRS commissioner said this week they've got, they collected 14 million pieces of bank account information from people so that, you know, if instead of those people getting paid like a few weeks later after they input that information, the IRS has that now and could theoretically move ahead relatively quickly in paying those people early. So I think they've definitely learned a lot about how this works and they'll be doing it from A bit of a position of knowledge and from strength

of being all kind of mostly back at work as opposed to working from home quite as much as they were a few months ago.

[Charlie Turner]

What about certain groups of people who got their checks very slowly the first time? Has that been resolved?

[Rich Rubin]

I don't know about resolved. There are definitely still a lot of low income households that are still haven't gotten payments and the IRS is trying to find ways to reach them. You know, one of the interesting things about this program is that they really set out to make it eligible for people who don't have much income or even any income. And so that's a group and that includes people who don't have other contacts with the federal government.

They might not have Social Security benefits, they might not have VA benefits, they

might not file tax returns because they don't make enough money. And so the IRS just doesn't really have a file on them in the same way. And up to date information. And so reaching out to those people,

whether it's it's homeless people, it's low income people, it's immigrants, it's, you know, people who just aren't in that normal system that we think of in terms

of usual tax filing.

They've done a fair amount of work and have a lot more work to go in terms of getting those people into their files.

[Charlie Turner]

Is the IRS saying how fast it might get the money out to consumers this time?

[Rich Rubin]

No, they're not saying anything yet, and

I wouldn't expect them to say anything for a while. The IRS's job is to implement the laws that Congress gives them.

And so when we're in the situation we're in, which is Congress is thinking about a law but hasn't passed it, the IRS is not going to go out and start proposing, you know, talking about what it's going to do or what it, what it can do. You know, the IRS is obviously involved in these conversations.

The Treasury Department is there.

They make Congress well aware of what they can and can't do, but they try to limit the information that they provide to the public in terms of setting expectations really, until there's something that's actually a law and then they're implementing it, and then we'll, and that could be a few weeks and then we'll have some better clarity and guidance from the IRS on how this is all going to work.

[Charlie Turner]

Rich, what do we know about the enhanced unemployment benefits that are set to expire at the end of the month?

[Rich Rubin]

So it seems like we're pretty well Likely heading into a period where there's

going to be some lapse in those. And so that's going to be a problem for a lot of households.

And the negotiations are going on. It's a big sticking point for Republicans

who say that it's providing a disincentive for people to get back to work.

Democrats will argue that, well, no, we

actually aren't seeing much in the way of disincentives for going back to work. We're like the virus is the disincentive to go back to work. And we need to make households as whole as possible or more than. And so Republicans are trying to kind of settle on some mechanics for replacing part of wages but not give people more than they were making before the pandemic. And we'll see in the coming days whether they can come up with some sort of proposal and then take that into the negotiations with Democrats.

[Charlie Turner]

Yeah, workers got another $600 in weekly unemployment checks and Republicans want to cut that.

[Retail Industry Representative]

Yes.

[Rich Rubin]

So there was a $600 addition to regular unemployment benefits. And so that means that many people can make more from unemployment benefits than they were making before. Republicans want to kind of bring that below full replacement income level. And so we'll just see as they negotiate and figure out that that plan, what that's actually going to look like. And so that obviously leaves, you know, many millions of people in limbo right now because those $600 a week payments are going to start expiring.

[Charlie Turner]

US tax policy reporter Rich Rubin. Thanks, Rich.

[Rich Rubin]

Sure.

Thank you.

[Charlie Turner]

And that's your money briefing. I'm Charlie Turner for the Wall Street Journal.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Representative]

Infliction is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Representative]

they need while increasing megastore profits. They deserve it, don't they?

[Consumer Advocacy Group Representative]

Tell Congress stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.