The IRS released a draft Form 1040 for the 2021 filing season that includes a line that could allow taxpayers to claim any unpaid portion of their 2020 economic impact payments (EIPs).
Line 30 of the draft form, for “Recovery rebate credit,” would likely be used to claim EIP amounts still owed as a result of a decrease in income or additional dependents, according to a tweet by Tyler Evilsizer of the Committee for a Responsible Federal Budget after the August 20 release of the form.
That includes supplemental $500 EIPs meant for dependents of taxpayers who were told by the tax agency that they would have to wait for their payments until they filed their tax returns in 2021.
The IRS changed its stance August 14, announcing it would keep its nonfiler registration tool open until September 30 for disadvantaged taxpayers who didn’t meet an original May 5 deadline for registering their dependents online.
The IRS interpretation of the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) provision to distribute EIPs has been challenged in federal district court in McGruder v. Mnuchin, No. 2:20-cv-03590 (E.D. Pa. 2020).
The McGruder plaintiffs charge, among other things, that the IRS’s procedures for distributing EIPs, announced in press releases and FAQs, were “arbitrary and capricious” under the Administrative Procedure Act.
Payroll Tax Deferral
Seth Hanlon of the Center for American Progress noted in a reply to Evilsizer's tweet that Line 23, for “Other taxes, including self-employment tax,” would include any payroll taxes deferred under President Trump's August 8 executive order.
That executive order was criticized August 18 by more than 30 employer organizations, including the U.S. Chamber of Commerce, the National Association of Manufacturers, and the National Retail Federation, who denounced the payroll tax deferral plan as “unfair” and “unworkable” for employers and employees.
The National Payroll Reporting Consortium added its concerns in an August 20 statement that many payroll computer systems couldn’t be reprogrammed by the executive order’s deadline of September 1.
The statement also expressed concern about “the lack of IRS guidance on fundamental questions about how the deferrals work.”
The draft Form 1040 for 2020 expands to 38 information reporting lines, up from 24 in the 2019 version, in part because lines requesting data from multiple sources have been split up and clearer instructions have been provided on the form.
Neither the 2019 nor the draft 2020 form’s layout fulfills the Trump administration’s and Congress’s original pledges to design a “postcard” Form 1040.