An IRS chief counsel interpretation of the law mandating coronavirus emergency stimulus payments led the agency to send $1.4 billion to more than 1 million dead people.
Another 445,000 individuals with children eligible for additional economic impact payment funds didn’t get them because the IRS’s online Get My Payment nonfiler tool failed to include them in its calculations, according to a Government Accountability Office report released June 25 on federal COVID-19 fiscal relief efforts.
The IRS Office of Chief Counsel used its discretion granted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) to approve payments to anyone who filed a 2018 or 2019 tax return, without a filter for the deceased, the GAO found.
Treasury and the IRS were mindful of the CARES Act’s instruction to distribute the money as “rapidly as possible,” the GAO said, but they faced several challenges that complicated their response.
For one, Treasury could distribute no more than 7 million paper economic impact payment checks per week. Those checks went to the millions of taxpayers who don’t have direct deposit information on file with the IRS, but millions more either don’t have a financial account, are homeless, or are otherwise unreachable by conventional means.
The GAO report is only a partial overview of the challenges faced by the IRS, Treasury, and other federal agencies in the early months of the COVID-19 crisis, the oversight body said, noting that the Office of Management and Budget directed that federal agencies don’t have to report coronavirus emergency fiscal commitments or expenditures until July 2020.
“It is unfortunate that the public will have waited more than 4 months since the enactment of the CARES Act for access to comprehensive obligation and expenditure information about the programs funded through these relief laws,” the GAO said.
Where’s the Oversight?
Senate Minority Leader Charles E. Schumer, D-N.Y., demanded accountability over CARES Act funds.
“Where’s the Republican oversight?” Schumer said in a June 25 statement. “This is a $3 trillion package. And every small bit of oversight that the Republicans have done has had to be pushed by Democrats. We should be having far more robust oversight over what has happened, as well as moving forward on a new bill.”
In fact, the Trump administration ousted Glenn Fine, the first inspector general appointed to the Pandemic Response Accountability Committee to oversee CARES Act spending. The GAO also said it would start working with another CARES Act-inspired oversight body inside Treasury, the special inspector general for pandemic recovery, “once it is operational.”
But others argued that the relatively small number of economic impact payments going to dead people is actually an IRS success story. According to the GAO, the IRS sent 160 million individual payments worth $269 billion through the end of May. That means that only about 0.5 percent of the total amount has gone to the deceased.
Chye-Ching Huang of the Center for Budget and Policy Priorities tweeted June 25 that it’s “not clear this is a terrible policy outcome,” especially considering the need for the government to act quickly. Low-income families that have lost loved ones to the pandemic could use the unanticipated funds for funeral expenses, she noted.
The IRS has said that those who received payments meant for dead people should return them, but Huang argued that “the legal position is at best murky” for claiming that Treasury and the IRS are empowered by the CARES Act to recover improper payments.
Bring Out Your Dead?
IRS employees first raised the possibility of improperly sending stimulus payments to the dead during the run-up to passage of the CARES Act in late March, the GAO said.
The first three rounds of payments went out under policies and procedures developed for the 2008 stimulus program, the GAO said. But after reading media reports, Treasury in early May instructed the IRS to filter out decedents, and on May 6 the IRS asked the recipients to return the money.
However, the IRS has no procedures for receiving the requested repayments, the GAO noted. The IRS also told the watchdog that it has no plans to pursue repayment and no accounting for how much of the money might already have been returned.
The GAO also advised the IRS to consider options for notifying ineligible economic impact payment recipients about how to return them. The IRS agreed.
Some snafus could’ve been avoided if the IRS had stuck with controls, updated seven years ago after a 2013 GAO report, that matched taxpayer accounts with death records to identify and prevent improper payments, the GAO noted.
The GAO recommended that Congress amend the Social Security Act to allow the Social Security Administration to share all death records with Treasury and its Bureau of Fiscal Services to detect and prevent improper economic impact payments.