The IRS has sent thousands of stimulus checks to Americans who meet certain income thresholds, but now they’re saying some individuals need to send that money back. Who has to return their payments?
The IRS is asking the following to return their coronavirus stimulus checks:
- Family members of deceased individuals (for the deceased person’s portion)
- Incarcerated individuals
- “Aliens” (non-citizens) who are nonresidents or non-qualifying residents
When the CARES Act was passed, the IRS committed to sending out payments of $1,200 to qualifying individuals. Since then, thousands of people have reported receiving stimulus checks made out to dead relatives.
On May 6, the IRS updated its FAQ page. They now say “a payment made to someone who died before the receipt of payment should be returned to the IRS.” About resident aliens they say “Aliens who received a Payment but are not qualifying resident aliens for 2020 should return the payment.” Lastly, they say incarcerated individuals, as defined by the Social Security Act, should return their money.
The IRS Did Little to Get Money Back During the Great Recession
The IRS’ decision to ask for payments to be returned has been met with confusion. As Money reported in April, tens of thousands of similar relief checks were paid to dead people during the Great Recession, and back then, the IRS did little to get that money back.
Furthermore, tax and legal experts who have weighed in on the subject in recent weeks have said the money would likely not need to be returned. Nina Olson, the former head of internal IRS watchdog Taxpayer Advocate Service, previously told Marketwatch, “The CARES Act stimulus bill contained no ‘clawback’ provisions for stimulus checks sent to a dead person, meaning the agency can’t retrieve the money after it’s been handed out. Congress didn’t write around that this year.”
The above guidelines are still unclear in many respects. For example, do people who were in jail when the CARES Act passed but have since been released qualify? And what about those who recently died because of COVID-19? Does that money still have to be sent back?
At this time, the answers are unclear.
What Will Happen If You Do Not Return a Payment?
Many people who fall into one of these categories are wondering what will happen if they do not send their stimulus checks back.
At this point in time, it’s unclear when or how the IRS intends to ensure that those who incorrectly received the money will send it back.
The Tax Foundation’s Garrett Watson tells 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.”
Those who do intend to return their stimulus checks must follow certain guidelines. If you received a paper stimulus check, you should write VOID on it and send it back to the appropriate IRS location, including a note stating why it has been returned. If you received an ineligible payment through direct deposit, then you’re expected to pay the money back through personal check or money order made out to the U.S. Treasury.
Learn more about how to return a check here.