After the Coronavirus Aid, Relief and Economic Security (CARES) Act passed, the government sent millions of eligible Americans checks for $1,200 as part of the stimulus package. Not everything went smoothly, and there are many people who still haven't received theirs, but there are also some people who received checks that definitely shouldn't have - because they aren't even alive.
It turns out Uncle Sam might have sent a lot of checks out to people who have died, and if that happened with one of your family members, the IRS is warning you to not cash it. With 150 million checks going out, there is no word on how many went to dead people, but it must be a fair amount since the IRS has added this to their FAQ about stimulus payments, noting deceased individuals are not eligible for payments:
A Payment made to someone who died before receipt of the Payment should be returned to the IRS by following the instructions in the Q&A about repayments. Return the entire Payment unless the Payment was made to joint filers and one spouse had not died before receipt of the Payment, in which case, you only need to return the portion of the Payment made on account of the decedent. This amount will be $1,200 unless adjusted gross income exceeded $150,000.
Also, the IRS wants any checks that were sent to people who are in jail returned to the government, however, their definition of who that applies to is pretty hard to understand. They say, "A person is incarcerated if he or she is described in one or more of clauses (i) through (v) of Section 202(x)(1)(A) of the Social Security Act (42 U.S.C. § 402(x)(1)(A)(i) through (v)).”
So what happens if you don't return a check that the IRS wants back? Well they don't explicitly say, but one tax specialist told WSB-TV, "The check is really a pre-payment of a credit that everyone is going to be computing on their 2020 tax returns. So if someone isn't filing a 2020 tax return, there's no way they're entitled to this credit." However, another explained to Money:
"I suspect the IRS will encourage people to return payments given incorrectly, but it’s less likely the agency will pursue people legally or through the 2021 tax season. It’s important to note that the IRS FAQs are not considered legal documents or even formal guidance, so while they are helpful in establishing the agency’s position, we’d need more details before knowing whether they’d have a strong case to pursue individuals legally over the payments."
If you do return a stimulus check, the IRS wants you to write VOID on the back and mail it to your regional IRS location with a note explaining why you are returning it. If you've already deposited it, you're expected to pay it back with a personal check or money order made out to the U.S. Treasury. You're supposed to write 2020EIP on the check as well as the social security number of the ineligible person the check was sent to, and include a note as to why you're returning it.
This isn't the first time something like this has happened. The same thing occurred with stimulus payments during the recession in 2008. Back then, the IRS didn't put forth much effort to get the payments back.
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