Not everyone who gets a stimulus check can spend it. IRS sends payments to the dead

Not everyone who gets a stimulus check can spend it. IRS sends payments to the dead

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People have until noon Wednesday to submit bank account information if they want to receive stimulus payments by direct deposit.

People have until noon Wednesday to submit bank account information if they want to receive stimulus payments by direct deposit. (Dreamstime/TNS)

MIAMI - When Judy Eitneier received a $1,200 check from the Internal Revenue Service last month made out to her mother, she was puzzled.

"What? Why?" Eitneier said, describing her reaction. "Mother is dead."

In its haste to revive the economy during the coronavirus pandemic, the IRS has been sending $1,200 stimulus checks to dead people.

The federal tax-collecting agency won't divulge how many Economic Impact Payments have been mailed in error, nor the amount of money disbursed to the deceased. The IRS has also mailed an untold number of the checks to people who are incarcerated and ineligible for the relief funds.

The tax agency knew some of the intended recipients are dead. Their checks include the notation DECD, for deceased, right next to the last name, but were sent anyway.

It's not clear what heirs should do with the payments. The IRS initially said they could keep them, but later said they should give the money back.

Linda Dasher, 80, a retired bank employee who lives in Coral Gables, received $2,400 for herself and her late husband, who died at age 76 in April 2018.

"I was shocked when the check came," Dasher said, laughing. "It's a nice little surprise but I don't think I'll go out and get a boob job.

"Who would have thought I'd be alive to see something as weird as coronavirus?"

The $2.2 trillion CARES Act passed by Congress empowers the IRS to send payments to eligible 2019 or 2018 tax filers of up to $1,200 per adult for individuals whose income was less than $99,000 (or $198,000 for joint filers) and $500 per child under 17 years old - or up to $3,400 for a family of four.

"When Congress stood this program up, they had a choice - do it slow and more accurately or fast and less accurately. I think they made the right choice because we were and still are in an absolute emergency where people are not making any income," said Ryan Ellis, an IRS enrolled agent who runs a tax practice in Washington, D.C.

"It's a messy and sloppy, fast and dirty way to get money out the door. Leakages are inevitable when you're talking about 150 million returns filed per year. The IRS has a notoriously outdated computer system and undoubtedly knew this would happen but decided to deal with it later."

Aida Shafer, a Miami CPA at Viciana and Shafer, has heard from three clients who received checks for relatives who died.

"The government definitely dropped the ball," Shafer said. "Nobody was thinking, 'Wait, they're not here anymore and we're still sending a check.' The IRS had time to figure out if your adjusted gross income was too high. How could they not have time to figure out if the taxpayer was deceased? It's nutty. This could turn out to be a huge population receiving erroneous checks."

Asked why the government sent checks to people it knew had died, the IRS didn't explain but responded by reiterating the latest FAQ advisory on its website that "a payment made to someone who died before receipt of the payment should be returned to the IRS by following the instructions about repayments." Either write VOID on uncashed checks and return them, or, if they've been cashed or deposited, write a new check or money order to the IRS.

The government made a similar mistake in 2009 during the recession, when the Social Security Administration sent about 89,000 aid checks of $250 each to deceased people. That time, heirs were allowed to keep the money.

Dasher and Eitneier are debating whether to return the payments.

Eitneier's mother, Mary Shelton, was 98 when she died in December from Alzheimer's disease. Eitneier, 78, had moved her mother into her own Westchester home in early 2018.

"It was bad. It was hard. Then my sister died in March. Then coronavirus hit," Eitneier said. "Thankfully my mother had some savings. But that was wiped out quickly. Dying is very expensive."

Eitneier said she is not as desperate as some unemployed people waiting in food lines, but she could use the aid.

"I'm still paying my mother's bills. I'm overwhelmed by a 12-inch stack of paperwork and I'm not feeling well myself," she said. "It would help. But there are a whole bunch of people in deep financial straits who really need this.

"On the other hand, if I send it back, they'll find some way to waste it. I am anti-President Trump. I try not to get political. It's too stressful."

Dasher is hesitant to refund the payment for her husband, who was a U.S. Marine Corps veteran and retired Florida Power & Light employee. She lives off Social Security and a small annuity from the military. Her son lives next door; his meeting planner business is in trouble because of the coronavirus shutdown.

"I don't know what's fair or unfair anymore," she said "I'm not doing anything until the IRS orders me to. What are they going to do? Put an 80-year-old widow in jail? Plus they may change their mind next month and say keep it."

Shafer has told clients to hold on to the money.

"The thing that scares me about sending it back now is if your paper check gets lost you could be sent down another IRS rabbit hole," Shafer said. "Their mail is piling up. We've mailed things and they're not getting any attention. They're not answering the phone.

"For most people, this check has been deposited or spent. The law doesn't say anything about repayment."

The IRS screwup is another indication of government inefficiency and a chaotic response to the crisis, she said.

"Just like the PPP (Paycheck Protection Program) millions that went to big corporations, deceased people shouldn't be receiving these stimulus checks. Live people in need should," Shafer said.

Ellis is advising clients to hang on.

"Notice the wording: They say you should send it back. That is about as much of an honor system formulation from the IRS as I've ever seen," he said. "None of the usual threatening language. Until a more weaponized instruction comes out, I'd say keep it. By and large it's surviving widows and modest-income surviving heirs. The IRS would have to do a lot of detangling to get the money back, and it wouldn't look very caring. They have probably decided it's more politically expedient to call this the price of doing business.

"It goes both ways. I'm hearing from clients who have yet to be paid what they are due. If you don't get it, you can claim it on your 2020 return next spring."

Allan Roth, a financial adviser in Colorado Springs, tweeted about receiving a check for his mother with DECD printed adjacent to her last name.

"My mother passed away well over two years ago," Roth said. "The IRS system is smart enough to note she is deceased as I filed a 2018 final tax return but not smart enough to figure out deceased people can't stimulate the economy."

President Donald Trump sounded breezily confident that money sent to the dead will be returned. "Everything we will get back," he said at a recent press conference.

The checks have Trump's name printed on them. He encloses a letter with the White House letterhead, signed by him, explaining that "Our top priority is your health and safety. As we wage war on this invisible enemy we are also working around the clock to protect hardworking Americans like you from the consequences of the economic shutdown."

He thanks Congress for coordinating with his administration to "fast-track" the CARES Act, "which I proudly signed into law."

About 130 million individual Economic Impact Payments totaling $200 billion have been sent so far, the U.S. Treasury Department said.

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