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CARES Act Overseers Battle Erroneous Pay Confusion, Hurdles

Posted on Apr. 23, 2020

If you got an extra $500 in stimulus money for a child who just turned 17, you won’t have to pay it back, the IRS said April 22.

“There is no provision in the [Coronavirus Aid, Relief, and Economic Security Act] requiring repayment of an economic impact payment,” the IRS said in its latest COVID Tax Tips email, using the newly ineligible dependent as an example of the tax agency’s forbearance on certain erroneous coronavirus stimulus payments.

But millions of taxpayers suddenly being showered with cash may not have the sophistication or knowledge to deal with a mistaken child credit in their bank account, or an unexpected check for a deceased relative in their mailbox. And while the CARES Act provides no specific remedy to recover its own improper or erroneous payments, government watchdogs are mobilizing to monitor and reduce them where they can.

The Government Accountability Office will issue its first CARES Act oversight report in June, said Jessica Lucas-Judy, director of the watchdog’s strategic issues team. The law gave the GAO an extra $20 million for expanded oversight, she noted.

“When it comes to paying the wrong person, paying the wrong amount, paying someone without documentation, both TIGTA and GAO will be on top of that,” Lucas-Judy said.

The Treasury Inspector General for Tax Administration didn’t respond to questions about its coronavirus spending oversight activities, except to note that both TIGTA and Treasury are members of the Pandemic Response Accountability Committee (PRAC) of inspectors general monitoring CARES Act spending at their federal agencies.

The IRS didn’t respond to questions about its coronavirus oversight.

A Strategic Decision?

The $2.2 trillion in coronavirus stimulus spending has the potential to make erroneous and improper payments “an order of magnitude larger than” those from the American Recovery and Reinvestment Act of 2009, said Linda Miller, fraud and financial crimes practice leader at Grant Thornton LLP. Improper payments in 2009 reached a governmentwide record of $110 billion.

The fight against erroneous and improper payments has been a major preoccupation of IRS oversight bodies and Congress for years.

An April 1 GAO study found almost $175 billion in improper payments governmentwide — almost 10 percent attributable to Treasury and earned income tax credit claims. TIGTA in March found the IRS wasn’t adequately confronting false refundable tax credit claims. House Republicans in January quashed a move to expand the EITC in part because of its 25 percent improper payment rate.

However, under the circumstances of the coronavirus crisis, the government appears to have made a strategic choice about reining in improper and erroneously issued stimulus payments, Miller said.

“Clearly, the decision on Congress’s part was that it’s worth [the risk] to get the money into the hands of people who need it,” Miller said. “The risk was too high that the people who desperately need the money aren’t going to get it.”

Miller noted that in addition to the PRAC, Congress has mandated the creation of a special inspector general inside Treasury as well as a congressional oversight committee. The oversight overlap is bound to cause problems, she said. It’ll take six months to staff some of these new offices, she estimated. Turf wars may sap organizational efficiency, she added.

Lucas-Judy noted that there are laws that require agencies to track and try to recover improper and erroneous government payments, including the Improper Payments Information Act of 2002, which was amended by the Improper Payments Elimination and Recovery Act of 2010, and the Improper Payments Elimination and Recovery Improvement Act of 2012.

Will to Oversee

While there are plenty of laws, regulations, and federal overseers to monitor the COVID-19 improper and erroneous stimulus payments problem, “it’s not a matter of authority, it’s a matter of resources,” Miller said.

Lucas-Judy noted that the GAO is not only responsible for spending oversight on the CARES Act, but on the Coronavirus Preparedness and Response Supplemental Appropriations Act, and the Families First Coronavirus Response Act (P.L. 116-127).

Then there’s the will to employ resources, Miller added. “If you have an administration that is hostile to oversight, you’re not going to be able to be very effective,” she said.

President Trump issued a signing statement disavowing congressional oversight after he signed the CARES Act. He also dismissed Glenn Fine, the first nominee to head the PRAC. No permanent head of the PRAC has been named. (Treasury didn’t answer a question about the progress of the department’s own CARES Act inspector general.)

Senate Finance Committee Chair Chuck Grassley, R-Iowa, sent Trump a letter April 22 taking exception to the president’s signing statement.

The statement asserted that the White House wouldn’t allow the PRAC inspector general to issue reports to Congress without “presidential supervision,” Grassley noted.

“Over time, politicians in both the legislative and the executive branches have attempted to politicize IGs and use them for gain but, even the appearance of political interference in their process cannot be tolerated,” Grassley said. He urged the president to reconsider the signing statement’s language.

Miller said it’s no surprise dead people are getting stimulus payments. “We knew it was going to happen,” she said. “The Paycheck Protection Program was like throwing $350 billion in the air,” she added, while noting those disbursements are run through the Small Business Administration.

“The issue for the IRS is that people could engage in willful criminal activity and they would not know” unless the miscreant was audited later, Miller said. “The issue here is not one of statute of limitations, it’s the fact that [the IRS] is using old data. . . . These issues are inherent to the imperfect process of sending 18 million people a check,” not to mention more than 130 million electronic payments, she said.

As to the taxpayers receiving stimulus payments for dead people, Miller said the law — notwithstanding the CARES Act — is clear. Cashing a check that doesn’t belong to you “is stealing and is prosecutable under the law,” she said. “That doesn’t need to be spelled out in the CARES Act; that is common knowledge.”

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