Third stimulus checks: IRS agrees to protect payments of some Americans who owe debt

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(WJW) — The IRS has agreed not to seize the third stimulus checks of some Americans to offset federal tax debts.

That’s according to National Taxpayer Advocate Erin Collins. In a blog post, Collins states “The IRS has agreed to use its discretion to bypass offsets for federal tax debts for taxpayers who file 2020 returns that claim the RRC (Recovery Rebate Credit).”

It was previously thought that debt collectors would be permitted to seize this round of checks because of how the American Rescue Plan was passed by Congressional leadership.

Fox Business reports those who claimed an RRC would receive it as part of their tax return minus any debt.

Collins said after that law changed, she advocated for the IRS to use its discretion and not offset RRCs for outstanding federal tax debts “to preserve the goal of the credits; namely, to ensure that Americans receive fast and direct relief in the wake of the coronavirus (COVID-19) pandemic.”

She said in the blog dated Monday: “I am very pleased that the IRS has agreed to exercise its discretion under IRC § 6402(a) to refrain from offsetting RRCs to satisfy federal tax debts. It has committed to doing so as quickly as practical.”

Collins pointed out, however, that the offsets will have already been made for those who file their returns before the IRS can implement the change.

Additionally, the IRS only has the discretion to not offset overpayments to satisfy federal tax debts, she wrote. It is required to offset refunds in cases of state tax debts, overpayments of unemployment insurance benefits and overpayments of certain federal benefits.

“For taxpayers who already have had their RRCs offset to repay federal tax debts, we will work with the IRS to try to identify a way to make them whole,” she wrote.

Collins asked that Congress to consider changing the law for the 2022 filing season.

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