Dead people aren’t eligible for the $1,200 economic impact payments, the IRS said in updated guidance that lays out steps for returning money that has already been sent out.
The updated FAQ, posted May 6 on the agency's website, contrasts with earlier guidance that said families that received extra stimulus funds for ineligible children didn't have to return the funds.
“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,” the new FAQ says.
The IRS, which explained how payments received by ineligible individuals should be returned, also said that nonresident aliens and those in prison don’t qualify for the payments.
Critics of the IRS’s message pointed out the contrast between the May 6 FAQ and those issued earlier.
The updated FAQ says stimulus payments received for children 17 or older — above the qualifying threshold in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) — wouldn’t have to be repaid on 2020 tax returns.
Nina Olson, founder of the Center for Taxpayer Rights, called the update “absurd,” and told Tax Notes that there could be cases in which a person died from COVID-19 and the IRS would be trying to recoup a stimulus payment from their loved ones while they are mourning.
Olson also noted a stark contrast between the IRS’s stance now and in 2008, when stimulus checks issued to deceased individuals weren't required to be repaid.
“What is the legal reasoning for this?” Olson asked. The CARES Act doesn't say deceased people can’t receive stimulus checks, she said, adding that the hard stance may have come from the White House.
The IRS “is backing into a conclusion without any legal reasoning,” Olson said.
Patrick W. Thomas, founding director of Notre Dame Law School's Tax Clinic, said the new IRS guidance strikes him as contravening the clear statutory language that Congress enacted in the CARES Act.
“In the 2009 stimulus, Congress explicitly excluded certain incarcerated taxpayers, as well as taxpayers who died before their benefit payment was due. . . . This suggests that Congress knows how to exclude such taxpayers from this sort of benefit program. However, Congress did not include any similar language in the CARES Act,” Thomas said.
On the IRS denying stimulus payments to those in prison, both Olson and Thomas said they didn't see legal backing for that in the CARES Act.
Thomas tweeted that the IRS position on incarcerated taxpayers and taxpayers who died in 2020 “is flat wrong and should be rescinded. Failing that, it should be challenged.”
Lawmakers in the Dark
Some lawmakers said they weren’t immediately aware of the updated FAQ and wouldn't say if they are likely to intervene to allow the families of decedents to keep the money. “You’re the first person to ask me that question,” Senate Finance Committee member Tim Scott, R-S.C., said, adding that he would have to look more closely at the FAQ before making a statement.
Finance Committee member Benjamin L. Cardin, D-Md., was also unaware of the FAQ, but said he thought those who filed returns in 2019, or their decedents, should be able to claim the credit. “It was not a section I wrote, but that’s what I thought it was,” he said.
Sen. Robert Menendez, D-N.J., also a taxwriter, said he would have to take a closer look at the FAQ but offered a glimmer of hope to those who may be adversely affected.
“Obviously, the stimulus check was meant for the deceased individual, but if the individual had a family, that family could use it, so we have to look at it,” Menendez told Tax Notes.