Is the IRC § 6428 “2020 Recovery Rebate” Really a Rebate?

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In my previous post I challenged the conventional wisdom that the IRS cannot collect on EIPs – the “Economic Impact Payments” taxpayers received under IRC § 6428(f) in calendar year 2020. I argued that the provision in the law reducing your Recovery Rebate Credit (RCC) by the amount of EIP received (“but not below zero”) is irrelevant to the collection options of the EIP. Which by the way is a separate credit from the RCC altogether.

And millions of readers spit out their morning coffee in response to my blasphemy (I imagine).

With this post you may again want to set your coffee to the side. This time, instead of challenging conventional wisdom I challenge the very title of the code section itself: that is, whether IRC § 6428 really created a “2020 rebate” at all -at least as far as the EIP is concerned. I promise this is not merely an academic exercise: whether the EIP is a rebate (and for what year) matters profoundly in determining how the IRS could collect on erroneous payments. Since literally millions of these payments were issued, even a relatively small percentage of erroneous payments would yield a rather large absolute number of effected individuals. Further, newfound Congressional concern for the federal budget deficit and more narrowly targeting any future payments may presage an interest in collecting from those who shouldn’t have received the EIP in the first place. To roughly paraphrase former Senator Everett Dirksen, add a few million here and a few million there, and soon enough you’re talking about real money. 

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The EIP As A Rebate

Without rehashing my prior post too much, the most important aspect of a “rebate” is that it falls into the definition of a “deficiency.” See IRC § 6211(a) and (b)(2). Accordingly, an erroneous rebate could be assessed through the deficiency procedures and collected via administrative lien and levy.

So what is a rebate?

On this point, the statute (and in my opinion, case law) is not particularly straight forward. The statute defines a rebate as “so much of an abatement, credit, refund, or other repayment, as was made on the ground that the tax […] was less than the excess of the amount specified in subsection (a)(1) over the rebates previously made.” Let’s unpack that.

“so much of an abatement, credit, refund, or other repayment…” 

A rebate can be a lot of things: an abatement (that is administrative reduction of tax on the books), a credit, a refund, or just any other “repayment.” So basically any action that says you owe less, you owe nothing, or you get money back. But only in certain circumstances…

“made on the ground that the tax […] was less than the excess of…”

So the credit, refund, etc. has to result from a determination that the tax imposed is less than… something. Specifically:

the amount specified in subsection (a)(1) over the rebates previously made.

In the least helpful way imaginable, subsection (a)(1) is basically referring to the amount of tax shown on your return, plus any other amounts the IRS has already assessed. (And then of course, you have to subtract out any other rebates previously made… But that creates an infinite loop in our quest to define rebate, so we’ll ignore it for now.) Bringing it all together, this means a rebate is a payment etc. made because the tax imposed is actually less than the tax shown on the return plus any other amounts assessed.

In this definition the taxpayer really only has control over one thing: the tax as shown on the return. Every other part hinges on IRS action. At its simplest, it is the IRS determining that the right amount of tax is less than the taxpayer actually thought, thus culminating in a credit, refund, payment, etc.

But is that what’s happening with the EIP? Maybe. I think the step-by-step administration of the EIP can be conceptualized in different ways, but that there is a sync the actual disbursal of the EIP with the treatment of it as a 2019 rebate. Of course, I also think the statutory language (and proper tax administration) necessitates that the EIP be treated as applying to 2019 as a rebate.

EIP: A 2019 or 2020 Animal?

Consider if the EIP were a credit attributable to 2019 -as I’ve argued and as the statutory language seems to say. In that case, the IRS would reduce the amount of tax shown (or previously assessed) by the amount of EIP. This is an amount the which the taxpayer clearly did not claim (they couldn’t), so it is an adjustment by the IRS… Classic rebate.

It would result in a direct payment to the individual because it is refundable (treated as a “payment” under IRC § 6428(f)(1)) and, critically, it is completely free from being offset or reduced “by other assessed Federal taxes” under Sec. 2201(d) of the CARES Act (see Les’s post on the importance of that section here). Those “other assessed Federal taxes” being exactly the ones on the 2019 tax return that would otherwise cut into the check being sent out.

That is at least one way of conceptualizing the EIP that would result in it being subject to deficiency procedures… for 2019. But even if I think that’s how the statute is written, that might not be how the IRS is treating the EIP. The IRS appears to be using 2019 for EIP eligibility determinations but is treating the EIP as a 2020 credit (or payment, or…). My understanding is that IRS account transcripts verify this treatment.

But that doesn’t make it right. The closest thing to a court opinion on point (dealing with the nearly identical statutory language for the 2008 “recovery rebate credits”) strongly backs up the argument that any EIP payment is applicable to 2019.

As covered in Carl Smith’s posts here and here, we can look to the past (the 2008 “recovery rebate” credit, which were also codified at IRC § 6428) to better understand the present. The bill creating the 2008 recovery rebate credit was passed in early 2008, and the checks went out over the course of 2008 -much like the EIP, with 2020 replacing 2008. So we have basically identical circumstances for the credit’s issuance, as well as nearly identical statutory language (where relevant). What has the court said on which year the “advanced” refund applies to?

Here is the money quote from the 2nd Circuit: “the basic credit available under subsections (a) and (b) grants eligible taxpayers a refund applicable to the 2008 tax year, whereas the “advance refunds” available under subsection (g) grants eligible taxpayers a refund applicable to the 2007 tax year.” Sarmiento v. United States, 678 F.3d 147 (2d Cir. 2012). The 2nd Circuit goes on to disagree with the district court decision treating 2007 only as “measuring” how much credit someone should get, but 2008 as the year the payment actually applies to.

My thoughts exactly. Bringing it to the current iteration, IRC § 6428(f) does indeed measure how much EIP you should get based on 2019. But after measuring how much EIP you get based on 2019, the statute then applies the payment to that same tax year. You know, like a consistent statute would.  

Consider what it would mean if the EIP (IRC § 6428(f)) was applicable to 2020 instead. Under this conceptualization the IRS simply gave people a credit on their 2020 tax return and paid out the value of that credit in advance. 2019 only matters because it gave the IRS some indication of who would be eligible for the credit.

If the EIP is a 2020 credit that is merely measured by referenced to 2019 the deficiency procedures cannot apply to it. Literally no taxpayer “claimed” the EIP on their 2020 tax return, so it cannot possibly be a deficiency on the basis of the taxpayer showing the wrong amount of tax on their return. Further, the EIP wouldn’t meet the statutory definition of a rebate because it wouldn’t be issued based on an IRS determination that the amount of tax shown on the return (or otherwise assessed) was too much. There was no tax 2020 return or tax assessed at the time of the EIP, so there is nothing for the IRS to adjust in the first place. Crazier things have happened, but this would mean that the statute entitled “2020 Recovery rebates for individuals” did not actually pay out rebates in 2020 at all.

Let’s continue to investigate what happens if the EIP is applicable to 2020, and therefore is not a rebate. As far as collection goes, we know that it would not be subject to the deficiency procedures. But after that things get messy.

Is the IRS completely barred from assessment and thus administrative levy and lien? That isn’t clear, because the IRS can assess in certain circumstances without the deficiency procedures. Withholding and estimated tax payments are good examples: if I claim more than I actually paid on my tax return the IRS gets to assess without deficiency procedures. Which is necessary, because both withholding and estimated tax are disregarded in the definition of a deficiency. See IRC § 6211(b)(1). But the IRS is only able to assess without deficiency procedures in that instance because Congress has explicitly said it can under IRC § 6201(a)(3). I don’t see any other provision granting the IRS a method of assessment for recouping erroneous EIPs… though maybe they could use their regulatory authority (see IRC § 6202).

Note that the IRS can still collect from individuals without assessment… it just has extremely limited means of doing so. The IRS can recoup money that shouldn’t have gone out in three ways: politely asking you pay it back, offsetting other tax refunds or bringing a civil suit. In further bad news for the IRS, two of those three options might be effectively out of the question in the case of EIPs. Offset might be barred as a method of collecting erroneously paid EIPs based on the language of Sec. 2201(d), though I think that is an open question. Civil suits would be allowed, but as a matter of practicality would almost certainly not be pursued since they would cost far more than the amount of money being brought in. We are talking about (possibly) millions of relatively small erroneous payments cumulatively making up a large dollar value. A million individual cases is not practical. This means all the IRS could do to collect on erroneous EIPs is to politely ask for it back. I’m not even positive the IRS would go through the effort to do that.

If these three methods of collection look familiar it is because they are what the IRS is forced to resort to when trying to recover money resulting from a clerical or other computing error -for example, sending duplicate refund checks to a single taxpayer. Such payments are referred to as “erroneous nonrebate refunds.” Functionally, if not actually, this is how tax administration would be classifying all erroneous EIPs. But unlike traditional nonrebate refunds this treatment would result even if the mistake was entirely the taxpayer’s fault -say for grossly understating income on their 2019 return. And while that may be how things end up, I don’t think that’s what the statute requires.

About Caleb Smith

Caleb Smith is Visiting Associate Clinical Professor and the Director of the Ronald M. Mankoff Tax Clinic at the University of Minnesota Law School. Caleb has worked at Low-Income Taxpayer Clinics on both coasts and the Midwest, most recently completing a fellowship at Harvard Law School's Federal Tax Clinic. Prior to law school Caleb was the Tax Program Manager at Minnesota's largest Volunteer Income Tax Assistance organization, where he continues to remain engaged as an instructor and volunteer today.


  1. Norman Diamond says

    Let’s try again because this is important.

    “Withholding and estimated tax payments are good examples: if I claim more than I actually paid on my tax return the IRS gets to assess without deficiency procedures. Which is necessary, because both withholding and estimated tax are disregarded in the definition of a deficiency. See IRC § 6211(b)(1).”

    IRC § 6211(b)(1) says ‘The tax imposed by subtitle A and the tax shown on the return shall both be determined without regard to payments on account of estimated tax, without regard to the credit under section 31,’ etc. It determines two amounts of TAX not DEFICIENCY.

    IRC § 6211(a) says ‘the term “deficiency” means the amount by which the tax imposed […] exceeds the excess of— (1) the sum of (A) […] plus (B) the amounts previously assessed (or collected without assessment) as a deficiency, over— […]’ Amounts COLLECTED WITHOUT ASSESSMENT, including withholding and estimated tax, are explicitly included in the definition of a DEFICIENCY.

  2. Bob Probasco says


    Interesting post. Thanks. Sorry I’m just now getting around to responding.

    I tend to think that the EIP is properly treated as a payment, resulting in an overpayment, which was refunded, for 2018 or 2019 – even though the IRS treated it as applying to 2020.

    But, regardless of the year, I don’t think it qualifies as a “rebate.” Based on the statutory language, the refund was not made because the proper amount of tax liability was less than previously reported/assessed. Based on the statutory language, the refund was made because there was an additional deemed payment. While refundable credits are treated as “negative amounts of tax” under sec. 6211(b)(4), there is no comparable classification of payments as amounts that affect the amount of the deficiency. Ergo, the IRS can’t recover through the deficiency procedures.

    I don’t think it can be recovered by math and clerical error procedures either. The provision you cite, 6211(b)(1), only addresses payments that are reported (incorrectly) by the taxpayer on the return – withholding and estimated tax payments. The EIP is identified as neither and it’s not reported by the taxpayer on the return. The IRS calculated it. It seems to me, regardless of which year, that this is a classic non-rebate refund.

    Although it’s calculated by the IRS, it’s not a perfect analog of the example you cited of the IRS sending duplicate refund checks. Consider the reason that, under the language of the statute, it might later turn out that the EIP was excessive. The only reason I can think of is a subsequent determination by the IRS that the income tax return was incorrect and understated the taxpayer’s income, when the corrected AGI would result in a smaller (or no) amount. OK, that’s on the taxpayer, not the IRS’s fault. But I don’t think it’s enough to make this a rebate. Because the EIP is not a credit – it’s a payment, according to the government. Congress could have said to treat it as a refundable credit, but they didn’t.

    At least, that would be my argument.

    Additionally, I don’t think you can recover by offsetting a subsequent year’s tax refund. Not so much because of sec. 2201(d), because that prohibiting offsetting the EIP refund against other tax debts, not offsetting other refunds against a liability for excessive EIP. The better argument, I think, would be that if the IRS can’t assess – and I don’t think it can – there is no liability resulting from the excessive EIP against which a future tax refund could be offset. If the IRS can assess, they can collect anyway, but if they don’t can they offset under sec. 6402(a)? I don’t think so.

    Anyway, my thoughts on a very interesting issue. Thanks for sharing.

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