| Arizona Republic
COVID relief: Biden introduces plan that includes $1,400 stimulus checksJoe Biden introduced a $1.9 trillion spending package that aims to speed distribution of the coronavirus vaccines and provide economic relief.Associated Press, USA TODAYA possible third round of stimulus payments could come soon, with checks of up to $1,400 per eligible adult. But before the federal government issues those payments, it’s worth reviewing how the first two rounds went.Those rounds of payments achieved their major objective: Getting money into the hands of Americans quickly so that they could continue to pay bills as the COVID-19 pandemic led to business closures, rising unemployment and other economic fallout.As of mid-February, when the Internal Revenue Service shifted gears to focus on the tax-return filing season, the agency and Treasury Department had issued 160 million first-round payments to households totaling $270 billion, followed by 147 million second-round payments worth $142 billion.The money helped keep the economy moving, allowing people to make mortgage or rent payments, meet other bills and avoid credit delinquencies and bankruptcies. The money boosted savings, revived consumer spending, rallied the stock market and got the economy back on a growth footing.’Respect’: Elon Musk trolls GM, Chrysler on Twitter. Ford CEO responds with 1 word.Tax screw-ups to avoid: IRS tax season 2021: 9 costly mistakesShould retirees have qualified?But the shotgun approach by which money was sent out raised questions of efficiency and fairness. If the purpose of stimulus payments sanctioned by Congress and the White House was mainly to ease the impact from job losses and other income disruptions, why did nonworking individuals receive money, too?”Why in the world are retirees getting stimulus checks since their world was in no way affected by Covid?” said Scottsdale resident Bruce Freedman, a medical doctor, in an email. “If you have no job, no income (or) no business, you lost nothing.”The money, he argued, could have been better spent supporting the “thousands of people who truly got crushed.”Others have raised similar points.”On the benefit side, Social Security payments continue to go out each month, and 401(k) balances appear relatively unaffected,” wrote Alicia Munnell and Anqi Chen of the Center for Retirement Research at Boston College in a recent report. Deposit accounts weren’t imperiled, as the banking system remained sound, and retirement balances invested in stocks and stock funds have surged in value.The COVID-19 pandemic, the researchers concluded, “is not really a retirement story.”You also could question why nonworking children should have received stimulus funds. So, too, for employed individuals with a high net worth but relatively modest job incomes.It boiled down to a tradeoff between speed and accuracy as the pandemic spread.”Any plan to better target the checks to the right people for the right amounts would have created impossible delays, so I don’t know what they could have done differently,” said Ed Slott, a certified public accountant and head of IRAhelp.com.”Maybe some of these issues will be resolved in another round of checks, but still they need to get the funds delivered quickly so we may see similar problems.”Were debit cards effective?One problem that cropped up, especially in the second round, reflected how stimulus funds were delivered.In the first round, most of the money seemed to get disbursed as paper checks or direct deposits. In the second round, many recipients received debit cards, which seemed to confuse a lot of them.Donnis Deever said her first stimulus payment was deposited directly into her bank account, but later she received a piece of mail “that looked very much like any bogus credit card offer” containing a Visa debit card in an envelope that didn’t appear to have come from the federal government.Deever thought it might be a scam and discussed this with neighbors who suspected the same thing — until one of them went to her bank and received assurance that it was legitimate.”We all found this very discomforting (and) annoying,” the retired educator said in an email. She and others also griped about fees that apply on multiple withdrawals that could have “eaten away at the funds available to us.”The cards were issued by MetaBank, the Treasury Department’s financial agent but likely a company unfamiliar to most Americans.Consumer groups including Better Business Bureaus said they received numerous calls from readers questioning the validity of the cards. The groups warned the public about the possibility of incurring fees on the cards and the need to activate them and set Personal Identification Numbers. The groups also warned that scammers might be in contact by phone or other means, “trying to convince you to give up the card number or (other) personal information.”A lack of payment consistency probably didn’t help, either.”Some people who received a paper check last time might receive a prepaid debit card this time, and some people who received a prepaid debit card last time may receive a paper check,” the IRS said.Unfamiliar concepts for taxpayersMany of the terms and policies behind the stimulus program were foreign to Americans, creating the potential for more confusion.For example, what most people have loosely called stimulus payments are more precisely Economic Impact Payments — the term you’ll see on the IRS website, for example. These payments were actually advances on a special credit that Congress authorized for the 2020 tax year. They were paid ahead of the normal tax-return filing season to get the money out there faster, to dampen fallout from the pandemic.Free tax filing: Tax season 2021: IRS Free File is open for taxpayersThis explains why eligible individuals who didn’t receive a payment, or the full amount, still may request it in filing their 2020 tax returns. They do so by claiming the “recovery rebate credit” (which will require filing a return, even for people who normally don’t).Also unusual was receiving a tax break in advance — and a nontaxable benefit at that. Plus, the IRS didn’t issue receipts, which might prove a bit troublesome for people who got an odd dollar amount and don’t quite remember the size of their payment. Taxpayers will need to provide the correct amount of stimulus payments received so far if claiming a recovery rebate credit.Inconsistencies and other issuesAnd there have been other concerns raised and inconsistencies cited.For example, “Taxpayers should know that stimulus payments claimed through a tax return will not currently be protected from garnishment by debt collectors,” warned the National Consumer Law Center. By contrast, payments received earlier as checks, direct deposits or debit cards were protected.Similarly, those earlier payments weren’t subject to “offset” or being held by the IRS to satisfy back taxes or certain other debts (except for unpaid child support). Yet payments claimed on tax returns, as recovery rebate credits, are subject to that, the office of the National Taxpayer Advocate warned.In short, stimulus payments helped to contain the damage from the pandemic, with the economy now looking remarkably healthy.But with the benefit of hindsight, maybe the policymakers in Washington, D.C., can deliver the next round in a more carefully targeted and understandable manner.Reach Wiles at email@example.com.