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IRS in hot water over payments made to the deceased

In the US the Internal Revenue Service (IRS), the equivalent of our HMRC, has found itself in hot water after sending millions of dollars’ worth of Economic Impact Payments, also known as stimulus checks to the deceased.

In March the US Senate unanimously approved a $2.2 trillion CARES Act which allows every adult taxpayer earning a gross income of $99,000 or less, to receive a $1,200 tax-free grant, excepting non-resident aliens, people in prison and the deceased.

The issue is that thousands of people that have passed away have received the check – many even with the abbreviation for deceased ‘DECD’ typed after the name on the check. And in some cases even the executors of the estates have been named as co-beneficiaries of the payments meaning that they could legally cash them.

In response the IRS has asked for the money to be returned – after initially saying that relatives could keep it. Now US citizens are being asked to void the physical cheques and return them or make an online payment if the money was automatically deposited in a bank account. Many consumer affairs pundits, however ,are advising recipients to keep the money saying that compliance will probably come down to an honour system and that the likelihood of the IRS mounting enforcement activity is slim meaning that the cost to the IRS of this mistake could run into the 10s of millions.

The error comes as the database for eligibility is compiled from 2018/2019 tax returns and as a result people that have passed away in the intervening two years are receiving a payment. Defenders of IRS are saying that speed of the aid has been prioritised over accuracy.

This mistake goes to show just how important deceased suppression can be and that the commonly held perception that it takes significant time and effort to complete needs to be addressed.

 


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