IRS launches new tool, allows people who don’t file taxes to receive stimulus check

Another 5.24 million people filed for unemployment last week amid the coronavirus pandemic. Professor of Law at Seton Hall University School of Law Richard Winchester joins Yahoo Finance’s On The Move to discuss tax implementations on stimulus checks.

Video Transcript

MEG WHITMAN: Let's move on and talk about getting your stimulus check and who's eligible and how you can get it and what are the tax implications? There are a lot of questions about all of this that remain. Joining us now is Richard Winchester. He is a professor of law at Seton Hall University School of Law. And he's joining us now as part of our Taxes Made Simple segment, brought to you by TurboTax. Professor, thank you for joining us.

One of the things that's been talked about with these stimulus checks is that the IRS knows about you if you file taxes. But if you're someone whose income is too low, then you don't file for taxes. So how, then, do you get on the radar of the IRS and get that stimulus check?

RICHARD WINCHESTER: First of all, thank you for having me. So the IRS just launched a new tool recently to allow people who don't file to provide the information that the agency will need to send them a check. So these are for all non-filers. That would include people who are-- that would not include people who are receiving Social Security, retirement, or disability benefits. Those people may not have to file right now, but the agency already has the information they need to provide those individuals with their money automatically. And they'll be receiving their stimulus checks the same way they receive their benefits.

So if you are a non-filer who also does not receive Social Security, retirement, or disability benefits, you just go to this web portal called Enter My Payment Information Here. And you will provide all the information they will need to determine your eligibility and to determine the amount of your check. This portal will also-- yes, Adam?

ADAM: No, no, no. Go on. Looked like you were about to say something. I want you to complete your thought.

RICHARD WINCHESTER: Yes. So there's another group of people who should also use this portal, and that consists of the group of people who might be receiving Social Security benefits or retirement or disability benefits, but who may have a qualified child under the age of 17. Remember, these checks are $1,200 per person, with a $500 addition for qualifying children under age 17. If you are receiving Social Security retirement or disability benefits, all the government knows is that you are receiving those benefits. And so they're going to base the amount of the check on you. They have no knowledge of the fact that you might have a child in your household. So if you want to get the full amount that you're entitled to receive, you're going to have to go to that app and input that information.

ADAM: This may seem like a silly question, but I am curious, if you get this money, is it subject to state taxes or it's free and clear?

RICHARD WINCHESTER: It's a little complicated, but for the vast majority of people, the answer is probably going to be no. It is very clear that this is not going to be subject to federal income tax. On the state tax side, every state is different. Most states just piggyback off of the federal system. However, there are variations. Each state has its own variation. And there is a very slight chance that there maybe a handful of states that allow you to deduct your federal income tax. And if you receive a credit, which is what this is, It's going to reduce that deduction.

And a reduction in a deduction is really just the functional equivalent of adding more income to your tax return. But there are a lot of moving parts on your tax return. So at the end of the day, a reduction in your deduction for federal income tax may not ultimately affect the refund that you get for state tax purposes.

So I think it's safe to say for the vast majority of people, it's going to have no adverse impact on their state tax refund. In those cases where it might, legislators are already tuned into this, and they don't want this to happen. So the stage where this might be an issue, it seems that they are taking steps to correct it.

MEG WHITMAN: Richard, I want to ask you about delays, as well, in the checks, because it seems like it's been pretty uneven. Anecdotally, I know people have gotten theirs already, who haven't gotten it. There was some talk that perhaps the president himself wanting his signature on the checks might have delayed it. The White House pushed back against that. But are there any implications to that sort of lumpiness in the timing of these checks going out?

RICHARD WINCHESTER: Well, the IRS has indicated that they're doing this from the bottom up. So they're starting with the people first for whom they have direct deposit information. Those are the people who are going to be served first. So the sooner someone provides the IRS with that information, the better. And they're starting from the bottom up, so people with the lowest incomes, working their way up. And of course, this program, you will get-- you're entitled to the full amount, $1,200 per adult, if you're an unmarried individual making no more than $75,000 as adjusted gross income, phasing out at $99,000. So the first people who are going to get the full amount are going to be served first. And then they're going to work their way up the chain.

People who are receiving supplemental security incomes will be in a second batch starting in May. All right. And then they're going to move to the paper checks. It's my impression that most people want to receive this money sooner rather than later. And because of shows like yours, there is a lot of attention being placed on the fact that if you want a direct deposit, you need to provide your information to the IRS now. And you need to go to these web portals to do so.

My thinking is, at the end of the day, anyone who has a bank account is going to give that information to the IRS. So that the IRS is not going to hand very many paper checks with Mr. Trump's signature on it at the end of the day. Whether those checks are in fact delayed-- the agency is telling us, rest assured, there won't be a delay just because we have to add his signature. We will have to see.

MEG WHITMAN: Indeed, we will. Thank you, Richard, for your perspective. Richard Winchester is a professor of law at Seton Hall University School of Law. Thank you so much for your time. Appreciate it.

RICHARD WINCHESTER: My pleasure.