Sara Aurentz Douglas, a fourth grade teacher who lives in Gladstone, Oregon, was crushed when she found out her $3,400 stimulus check was garnished by the IRS to pay her husband’s back child support.
“It was a devastating blow,” says Douglas, who was still expecting to get $2,200 in emergency relief money for herself and her two children. “I’m a teacher. I’m not rolling in the dough.”
Douglas, 45, was hoping to use the money to cover utility and grocery expenses that have jumped since her two sons, 11 and 13, have been forced to stay home as schools have shuttered due to the coronavirus outbreak.
Her husband, who works as a driver and trainer in the flatbed trucking industry, owes about $15,000 in back child support for three kids and currently has $1,300 garnished from his paycheck per month, including arrears that he owes.
“I understand completely why my husband's portion would have been taken for his children, but my portion and my children's portion just didn’t seem fair,” Douglas says. “I was so upset, overwhelmed and frustrated with the system. My children shouldn’t have to bear the financial responsibility for my husband’s other children.”
The dilemma Douglas faces is one that many Americans confront at the intersection of love, marriage, divorce and taxes. Many have complained their emergency stimulus payments were withheld by the IRS even though they already qualified for injured spouse relief, a process where a married couple filing their taxes jointly could seek to recover a portion of their tax refund for the spouse that owes no debt. Stimulus payments are typically treated like tax refunds.
The missing stimulus money has created confusion among many households seeking relief, and raised questions about how these payments are distributed.
“It’s an empathetic issue,” says Francine Lipman, a tax expert and professor with the University of Nevada, Las Vegas School of Law. “These women have empathy for the other children in that household, but they still have their own financial circumstances. It’s very complicated because there are innocent children on both sides of this.”
The CARES Act suspends debts like overdue student loans or back taxes that typically lead to the garnishment of tax refunds, but it doesn't apply to delinquent child support payments. That means the government's relief checks will still be garnished if you're overdue. Some spouses are angry their stimulus money is being trimmed or withheld, even if they typically qualify for relief in situations like tax refunds.
To be sure, if you qualify for injured spouse relief when filing your 2018 or 2019 tax returns, you will get a portion of your stimulus payment back.
The IRS said this week it is aware of the situation and is working with the Bureau of Fiscal Service, the U.S. Department of Health and Human Services and the Office of Child Support Enforcement to resolve the issue “as quickly as possible.”
If you filed an injured spouse claim with your 2018 or 2019 tax return, whichever is most recent, and are impacted by this issue, the IRS said you don’t need to take any action. The injured spouse will receive their unpaid half of the total payment “when the issue is resolved.” There is no need to file another injured spouse claim for the payment, the agency said.
The agency didn’t immediately respond to requests for comment on when the issue would be fixed.
How much money will I get?
Half of the total stimulus payment will be sent to the spouse that qualifies for injured spouse relief while the one who owes back child support will see their portion either trimmed or withheld for past-due child support, according to the IRS.
In the global financial crisis in 2008, the IRS also allowed those who had filed injured spouse relief forms with their tax returns to receive stimulus relief. In those instances, the money was split down the middle, too.
Many are still left confused
Katy Servos, 39, checked the IRS website to track the status of her stimulus check, which said the money was already deposited into her bank account. When the money didn’t show up, Servos, who lives in Raytown, Missouri, called her credit union, which went through all of their incoming IRS payments twice to make sure her funds weren’t misapplied to another account.
Then she received a letter from the IRS saying her $3,900 stimulus check was garnished for her husband’s overdue child support. The notice, however, also included information about potentially qualifying for injured spouse relief to recoup some of the funds. The problem? She had already completed the form when filing her most recent tax return.
“I cried. It was very defeating,” Servos says, who has been married for nearly 16 years and has filed her taxes with injured spouse relief in the majority of those years to recoup a portion of her tax refund. “Why did they even send me this letter if I’ve already filed my taxes with this form?”
Servos, an account executive at insurance wholesale company RT Specialty, is the breadwinner for her family as her husband stays home taking care of their four children. She also has a second job in direct sales at Scentsy, a marketing company that sells scented products like wax warmers.
Servos’s husband fought in court three times to get custody of the child, but all of the court payments were later applied to his child support dues, she says.
“This isn’t my responsibility and it isn’t my children’s fault either,” says Servos.
How did the error happen?
It's still unclear, but Lipman has one theory as to why some Americans' payments were garnished despite qualifying for relief.
“It’s possible the older IRS software overlooked that form,” Lipman says.
The IRS is currently in the midst of a multi-year plan to improve its aging technology infrastructure that it estimates will cost about $2.3 billion to $2.7 billion, according to the agency's taxpayer advocate. Its success, however, depends on the additional funding it receives from Congress.
Greg Wilson, executive director at Child Support Directors Association of California, said there was a possible coding error in the systems between the Treasury Department, the Office of Child Support Enforcement and states where injured spouse claims for 2019 returns may not have been in databases when stimulus payments were processed.
“There's been more questions than answers all around," Wilson says. "I’m hearing that some injured spouse claims were not properly accounted for when the stimulus payments went out.”
The Administration for Families and Children, which oversees the Office of Child Support Enforcement, didn’t immediately respond to requests for comment.
How long will it take to fix?
Be patient. It could take months before the issue is fixed, experts caution.
"The IRS is trying to put out a lot of fires at the same time that it’s understaffed and not answering calls or mail,” Lipman says.
Stimulus payments tend to work like tax refunds. The IRS processes a return and then sends a file to the Bureau of the Fiscal Service. The BFS, which typically issues tax refunds and stimulus payments for the IRS, determines how much of a refund gets taken for debts owed like back child support.
In some cases, tax refunds are normally withheld for up to 11-14 weeks, or even as long as six months if you filed a joint return with an injured spouse claim, according to Christina Taylor, head of operations at Credit Karma Tax.
Why the lag time? That's because the agency typically anticipates that an injured spouse claim may be coming through, so they hold it longer instead of paying it to the recipient in case a portion of it needs to go back to the injured spouse.
Roughly 95% of stimulus payments are expected to go out in the next four to six weeks, Taylor says.
“I would hope folks with injured spouse claims would be getting their money in the next four to six weeks,” Taylor says. “If not, the IRS will issue stragglers of stimulus payments throughout the rest of the year, so it may be later in 2020 before they get their money.”