When the first coronavirus stimulus checks arrived, an unknown number of people were surprised to discover that their deceased loved one received $1,200. Or in many cases, people who were recently widowed received $2,400, rather than $1,200, because the IRS thought they were still married based on their last tax return.
Now the IRS has finally told people what they should do in this case.
Big surprise: Return it if the recipient was dead on the date the payment was received, says the IRS.
If you received a $2,400 payment based on a joint tax return and your spouse has died since then, you’re expected to keep your $1,200 and return their $1,200.
Why Are Dead People Receiving Stimulus Checks?
It isn’t surprising that this happened. The payments were made based on the most recent of someone’s 2018 or 2019 tax return.
The year someone dies, their estate still has to file a tax return on their behalf. That means there’s a good chance someone who died within the past two years would have a 2018 or 2019 return on file with the IRS.
The IRS cross-references the payments with death records from the Social Security Administration, but it isn’t that shocking that there would be some lapses, given that the IRS has processed more than 120 million payments since mid-April.
Also, it takes time for Social Security records to be updated, so if someone died recently, they’re more likely to get a payment.
How Do I Return the Payment?
If the payment was made via direct deposit or you’ve already cashed it, you’ll need to mail a check or money order to the IRS to the appropriate address listed on the Economic Impact Payments FAQ (Question 41 as of May 7).
You’ll make it payable to the U.S. Treasury and write 2020EIP and the person’s Social Security number or individual taxpayer identification number on the check. Include a brief statement saying that you’re returning it because the recipient has died.
If the person received a paper check that hasn’t yet been cashed, write “void” on the endorsement section on the back of the check and send it to the appropriate address listed on Question 41 of the IRS FAQ. You should also include a note that says the recipient has died.
What Happens if I Don’t Return My Loved One’s Payment?
Many are skeptical about how enforcement would work. It would be time-intensive and expensive for the IRS to go after a relatively small number of payments made to the deceased. Plus, it wouldn’t look great for the IRS to go after people who have lost loved ones recently over $1,200.
Some have questioned whether the CARES Act even allows the IRS to come after payments.
“A reading of the CARES Act does not provide a clear way for the IRS to callback the monies,” said Patrick Simasko, elder law attorney and wealth preservation specialist at Simasko Law in Mount Clemens, Michigan. “So, it will likely take a new amendment or an IRS regulation to give the government any teeth in reclaiming the funds without voluntary turnover by the populace.”
The IRS hasn’t said what, if any, penalty people could face if they don’t return the checks.
When the last round of stimulus payments went out in 2008, the IRS didn’t try to collect on payments made to the deceased.
Still, if a dead person’s stimulus payment is in your hands or bank account, returning the payment isn’t just what the IRS wants you to do. It’s the right thing to do.
Those payments are meant to help the living — many of whom are in dire need right now.
Robin Hartill is a certified financial planner and a senior editor at Codetic. She writes Codetic’s Dear Penny personal finance advice column. Ask her your tricky money questions at [email protected].