How does a client get their Economic Impact (stimulus) Payment?
Update 02/12/2021 – The IRS no longer uses 2019 EIP returns to qualify taxpayers for stimulus money; therefore, preparers should not file 2019 EIP returns anymore. Taxpayers who want to become eligible for stimulus money, but haven’t filed taxes for the past few years, should now file a 2020 tax return and claim the Recovery Rebate Credit. This will also make them eligible for EIP #3, currently being debated in Congress.
Most taxpayers do not have to do anything to receive their EIP. Taxpayers will generally fall into one of three categories. Determine which of the following applies to the taxpayer's situation, then follow the process indicated below:
- If the taxpayer qualifies to file a tax return on Form 1040 or 1040-SR, go to item 1.
- If the taxpayer is a social security beneficiary who is not required to file a tax return, see 2 below.
- If the taxpayer does not fit into category 1 or 2, they must file a simple return in Drake19; see 3 below.
A taxpayer should not file both a regular 1040 and a simple EIP return. This will result in reject R0000-932-02. See Related Links below for details.
For more information about the Economic Impact Payments, including details on amounts and qualifying individuals, see the IRS website. A Frequently Asked Questions section is available to address some common issues. Sections help further define those who are and are not eligible to receive a payment, as well as how to return payments received in error.
The amount of EIP received will be required when filing the 2020 tax return, see Related Links below for details regarding Drake20 data entry.
1. Regular Filers
If a taxpayer has already filed a 2018 or 2019 return on which direct deposit information was included, the IRS will use that account to directly deposit their Economic Impact payment. If the taxpayer did not receive a refund in 2018 or 2019, they can use the IRS portal to enter their direct deposit information. See the IRS Economic Impact Payments page for details.
2. Social Security Beneficiaries
Social Security beneficiaries who are not typically required to file tax returns will not need to file a simple tax return to receive an Economic Impact Payment. Instead, payments will be automatically deposited into their bank accounts. See Related Links below for more information on the Treasury Department’s announcement.
3. Simple Return
Those taxpayers who normally are not required to file a tax return will need to file a “simple tax return” in order to get a stimulus payment. This allows taxpayers who did not file a 2018 or 2019 return to provide their household and direct deposit information to the IRS/Treasury department. For more information, review the IRS website and the Non-filers page.
For a demonstration of this process, watch the video Economic Impact Payments.
In Drake Tax, complete the following steps for a “simple return” to be generated and eligible for e-file.
- Create or update the return by going to Open/Create and typing in the primary SSN.
- On federal screen 1, complete the demographic information including:
- Filing status
- Only single or MFJ will be checked on the form.
- No other indicators (65 or older, blind, etc.) will be checked on the EIP form as they are not relevant.
- Taxpayer SSN and name,
- Spouse SSN and name (if applicable),
- Mailing Address,
- “Dependent of another” checkbox, if applicable,
- Someone who is the dependent of another does not qualify for an EIP. This checkbox should only be used if MFJ and the taxpayer/spouse is the dependent of another. In that scenario, the IRS would only process an EIP for the taxpayer who is not a dependent of another, even though they're filing MFJ. See the CARES Act, Section 6428 for details on qualifying individuals.
- “EIP Military Spouse with ITIN” checkbox, if applicable (yellow below).
- Check the box Economic Impact Payment (EIP) ONLY.
- If the taxpayer qualifies to claim any dependents*, on screen 2, enter the dependent’s information including:
- Number of months in home,
- Dependent’s IPPIN, if applicable.
- On the DD screen, enter the bank account information as Account #1. This step is optional; however, it is important to note that if the DD info is not included, a paper-check will be sent to the address listed on the return instead of direct deposit.
- State/City selection should be left blank.
- Enter the bank name, routing number, account number, checking/savings checkbox and repeat the information to confirm.
- Note that the payment cannot be split between two accounts.
- On the IDS screen, enter the taxpayer (and spouse, if applicable) ID information or check the box to indicate that they either do not have or did not provide their driver’s license or state-issued photo ID.
- Complete the PIN screen.
- If the taxpayer and/or spouse was issued an Identity Protection PIN (IPPIN) from the IRS, be sure to enter that as well.
- Calculate and review the return. When ready, e-file as usual and check for an “A” Acknowledgement.
- No state returns will be generated if the EIP checkbox is marked on federal screen 1.
- No forms, schedules, or attachments will be e-filed with the federal return, even if they are provided.
- The return will report $1 of interest, per IRS specifications.
- Only taxpayers with a valid SSN will receive the EIP.
- Most spouses must also have a valid SSN. If the spouse has an ITIN, and is the spouse of an active member of the US military, the EIP can be claimed.
- *Only dependents under 17 who have an SSN will be included on the simple return. Other dependents do not qualify for the additional $500 EIP.
- A zero return without the EIP checkbox marked cannot be e-filed due to EF message 0192. See Related Links below for details on this limitation.
- The simple return can be paper-filed, if the taxpayer does not wish to e-file. A watermark of ***EIP2020*** will be printed to indicate that the return is only being filed for Economic Impact Payment purposes. The IRS did announce on April 10, 2020 that: "All taxpayers should file electronically through their tax preparer, tax software provider or IRS Free File if possible. The IRS is not currently able to process individual paper tax returns. If you already have filed via paper but it has not yet been processed, do not file a second tax return or write to the IRS to inquire about the status of your return or your economic impact payment. Paper returns will be processed once processing centers are able to reopen. This year, more than 90% of taxpayers have filed electronically."
- Note 712 is generated in view mode.
- PPR Users: A simple return is considered a return. When a return is first created, you are reminded that this return will count against your total PPRs.
- Protection Plus: Firm Level users will not be charged for the simple EIP returns.
- Bank products are not available for EIP returns.