By Richard Rubin 

WASHINGTON -- Social Security recipients won't need to file tax returns to receive the $1,200 one-time payments authorized in the new economic-relief law, the Treasury Department said late Wednesday in a reversal of its prior position.

The move came after Democrats in Congress pressed the administration to find a way to get the payments to seniors who already receive direct deposits or checks from the federal government every month and don't typically file tax returns.

"Social Security recipients who are not typically required to file a tax return need to take no action, and will receive their payment directly to their bank account," Treasury Secretary Steven Mnuchin said in a statement.

The administration's reversal is a signal of a challenge that will remain as the Internal Revenue Service tries to implement the law and get money to Americans quickly. The tax agency has little trouble keeping track of the Americans who file returns every year, but it now has to identify and pay millions who don't.

Under the law signed by President Trump last week, people are eligible for $1,200 payments from the government, even if they haven't earned any income or filed a tax return in years.

Estimates of the number of so-called nonfilers range from 18 million to 30 million, said Elaine Maag, a principal research associate at the Tax Policy Center in Washington. That includes some retirees on Social Security, people who live on veterans' benefits or disability payments and others who just don't earn the $12,200 minimum for an individual that normally requires filing a tax return.

Wednesday's decision will narrow the list of nonfilers trying to get money from the IRS.

"The IRS is kind of flying blind figuring out: How are they going to find all of these people?" Ms. Maag said. "It's a difficult task, and then you throw in the element of speed and it just makes it all the more difficult."

The IRS plans to start making payments within three weeks as part of the roughly $2.2 trillion program to help households and companies weather the economic fallout of the coronavirus pandemic.

To do that, it has said it would create simple forms so people who have legitimate reasons for not filing returns can supply information such as bank account details for direct deposits. That information is important because people who need paper checks will need to wait much longer.

People over 16 with work-eligible Social Security numbers qualify for $1,200 payments, except nonresident aliens and those listed as another person's dependent. The payments start shrinking once adjusted gross income exceeds $75,000 for individuals and $150,000 for married couples.

For those who typically file tax returns, the IRS will base the payments on 2019 returns -- or 2018 returns if the 2019 returns have not been filed.

Reaching nonfilers will be trickier. Many low-income households do file tax returns annually, because breaks such as the earned-income tax credit provide refunds that exceed income tax liability.

But a variety of circumstances keeps millions of others from filing. Some face language barriers; others are daunted by the tax-filing process. Still others are worried about doing anything that could hurt their ability to claim other benefits, such as food assistance. The one-time checks under this law aren't considered income that would change eligibility.

"For a large number of these people, this is a red-tape barrier," said Tara McGuinness, a former Obama administration official now at New America, a Washington think tank. "The people who need this thing the most are the literally hardest to find and reach."

Iris and Arthur Kessel, retirees in Sun City, Ariz., could use the cash to buy a new air conditioner. They haven't filed tax returns since 2016 and have been talking to their former accountant to figure out what to do.

"$2,400 would come in awfully handy," Mr. Kessel said. "We're in the same boat as everybody else. We need X amount of dollars to survive every month."

Congress last made such payments in 2008, during the financial crisis. Millions of nonfilers who may have been able to get payments didn't file tax returns and thus didn't get the money, according to an inspector general's report.

Those who can't afford to pay for tax advice can turn to the Free File Alliance, composed of tax-preparation companies that offer advice at no cost. H&R Block Inc. says it is working with other companies to help people who normally don't file returns.

Some lawmakers are pressing for ways to help nonfilers. Rep. Richard Neal (D., Mass.), chairman of the House Ways and Means Committee, is urging the Free File Alliance to make simple forms available.

Mr. Neal said the coronavirus epidemic prevents many low-income taxpayers from getting the free assistance that would normally be available to them. He has asked the Trump administration to look for ways to get payments to people who receive federal benefits without making them file a tax return.

Forty-one senators followed up with a similar request on Wednesday. The government already has bank-account information for people who get Social Security and veterans benefits.

Until Wednesday night, the IRS had said that many of these people would need to file a tax return.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

April 01, 2020 20:41 ET (00:41 GMT)