By Theresa Schliep

Law360 (July 16, 2020, 7:19 PM EDT) -- Almost 40% of adults living at or below the federal poverty line didn't receive coronavirus relief payments from the IRS by mid- to late May, the Urban Institute said in a report released Thursday, outlining disparities in the relief's distribution.

Black and Hispanic Americans and people living in poverty were less likely to receive their economic impact payments than white households and people living above the federal poverty line, the Urban Institute said in a report analyzing a group of people who received their payments by the end of May.

Nearly four out of five people with incomes above and up to 600% of the federal poverty line received their economic impact payments, according to the report. In comparison, about three out of five adults at or below the poverty line received payments by mid- to late May.

"There were challenges in getting the payments out to people who currently aren't a part of the tax system or people who are low income," said Janet Holtzblatt of the Urban-Brookings Tax Policy Center, who authored the report. 

Fewer Black and Hispanic Americans received payments by mid- to late May than non-Hispanic white households, the report also found. Black adults were around 5% less likely to receive the payments than white adults, while Hispanic individuals were about 10% less likely as compared with white individuals, data showed. 

Overall, around 70% of adults received the payments, according to the report. It pulled data from a survey of nationally representative nonelderly adults. 

The Coronavirus Aid, Relief and Economic Security Act , which was signed into law in March, charged the IRS with the responsibility of distributing payments of $1,200 for qualifying individuals and $2,400 for couples, with additional $500 payments for qualifying children and phaseouts at higher income levels. But some people who qualify for the payment might get the relief later or not at all because they don't have information on file at the IRS, lack bank accounts or internet access or didn't know about the payments, the think tank said.

The Internal Revenue Service issued economic impact payments automatically to people who filed tax returns for 2018 or 2019 or who receive Social Security payments, military veteran benefits or Supplemental Security Income. Other individuals had to submit information to the IRS detailing their bank account information, which requires internet access. 

But around 20% of potentially eligible individuals who fall outside of this group of automatic recipients and who didn't receive payments reported to the Urban Institute that they don't have internet access, the report found. Furthermore, more than half of people living below the poverty line are unbanked, complicating efforts to send the payments using direct deposit, according to the report.

For Hispanic households, economic impact eligibility was sometimes curtailed by citizenship status, the report said. Around 54% of Hispanic adults who had noncitizens in their families received the payment, the Urban Institute said. Several lawsuits challenging a provision of the CARES Act that requires that recipients have Social Security numbers accuse the federal government of wrongly denying citizen children and spouses of immigrants the economic relief.

Furthermore, the IRS' dependence on tax filing information to distribute the payments means that people recently made eligible for the relief by income loss won't receive it until they file their taxes again in 2021, according to the report. Likewise, people recently rendered ineligible still could have received the payments since 2018 and 2019 tax returns don't account for recent gains in income, the report said. 

The IRS took little time to begin distributing the payments, an improvement upon three previous relief efforts that took several months to implement, according to Holtzblatt. 

"I give immense congratulations to the IRS for, in the midst of the pandemic and the shutdowns that went along with it, getting the payments out as quickly as they did and much more rapidly than they did in those three cycles," Holtzblatt said. 

But the federal government might benefit from using multiple federal and state agencies to distribute future economic relief payments to reach people who have had limited interactions with the IRS, the Urban Institute said. In a June report, the Center on Budget and Policy Priorities estimated that around 12 million Americans could miss out on the economic impact payments.

The IRS could also expand its use of prepaid debit cards to reach people without bank accounts, the Urban Institute said. But those cards should be clearly marked, the group said, citing reports that some unaware individuals threw out their payments because they looked like junk mail.

The IRS' efforts to distribute the payments were also complicated by the pandemic itself, which forced the closure of IRS Taxpayer Assistance Centers and volunteer income tax assistance sites, the report found.

In a statement, the IRS said it has sent more than 160 million economic impact payments totaling over $270 billion. It also processed more than 126 million returns and issued refunds totaling more than $257 billion during the coronavirus pandemic despite having closed facilities and a large teleworking workforce, according to the IRS.

"There are no payment criteria involving race or ethnic background," the IRS said in its statement. 

In a report released June 8, the Treasury Inspector General for Tax Administration found that the IRS correctly calculated around 98% of payments. 

The government should explore how it can use state and federal agencies to deploy future economic relief, Holtzblatt said. 

"It's worth using this experience to think of how the government, at the federal and state level, could build a system that could reach both filers and nonfilers and minimize the burden on both groups in order to get assistance out in a timely fashion," she said. 

--Editing by Vincent Sherry. 

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