Dead giveaway: IRS sending stimulus checks to deceased

As of last week, 128.3 million stimulus checks totaling $218.4 billion had been sent out to American taxpayers shut in by coronavirus, including a fair number made out to people who are no longer living.

When the U.S. Senate unanimously approved the $2.2 trillion CARES Act on March 25, it allowed that every adult taxpayer individually earning an adjusted gross income of $99,000 or less, or filing jointly and collectively earning less than $198,000 would be entitled to a $1,200 tax-free grant, excepting non-resident aliens, people in prison and the deceased.

But the day before Mother’s Day, this reporter got a text from a sibling in Santa Cruz with an image of an IRS check made out to their deceased mother. “I think our country is in trouble…” the text read, with a laughing emoji added to lighten the mood. The check was made out in their mother’s name, with “DECD” - an abbreviation for “deceased” - typed right behind it.

The error was hardly an anomaly, as it turns out.

“Our family received two of these checks,” Sonoma Valley resident Jerrilyn Moorhead replied in an informal survey the Index-Tribune posted on the social media site Nextdoor.

“I got one, too, for my partner who passed,” resident Anastasia Riley added. “Made me sad and mad at the same time.”

Denise Sobel, of Sonoma, said that she knew of four misbegotten IRS stimulus checks received by relatives of people who had passed away. “I have a friend who received a check for her husband, mother and father-in-law, all who died in the last two years. (Also) just found out that my sister got a check for her father–in-law, who died two years ago.”

Tax professional Bonnie Lee, of the local accounting and tax preparation firm Taxpertise, has been helping Sonoma Valley taxpayers navigate the IRS gauntlet for many years, and as an enrolled agent, or E.A., holds the highest credential the agency awards. She knows a thing or two about how the IRS works, and defends their errors given the scope of the stimulus. “The IRS is sending checks to anyone who filed a 2018 or 2019 income tax return. Some of these people have since passed away, but the IRS may not be aware,” Lee said. “The IRS could have cross-checked every name to a (Social Security Administration) master file before sending stimulus checks to ensure that no deceased person received a check. Can you imagine how long that would take?”

Because the stimulus money was intended to help bridge economic gaps created by shelter-in-place mandates, Lee contends that speed was perhaps rightly prioritized over accuracy. But can those checks be legally cashed?

Initially, the IRS said that they could. Then, they reversed course and said that they couldn’t.

Now, the only scenario in which the money can be legally kept is in the case of a surviving spouse. “If the person was married, the remaining spouse is entitled to half the check, so only half needs to be returned,” Lee said.

Other than that, Uncle Sam wants his money back.

If a paper check was received by a decedent’s survivors, the IRS has instructed recipients to endorse the check with the word “void” and return it by mail with a note of explanation.

If funds were directly deposited into an account, a personal check should be sent payable to “U.S. Treasury 2020EIP,” with the deceased taxpayer’s social security number in the memo, likewise accompanied by an explanatory note. In both cases repayment must be unstapled, unfolded, and without paper clips.

Compliance may come down to the honor system, however. “I don’t know if the IRS would ever figure out or care or bother to attempt enforcement activity to discover if checks were cashed and monies kept by someone other than the designated recipient,” Lee said.

Electing to hang on to a dead relative’s stimulus money is a considered gamble, to say the least. The IRS is not routinely bested by individual taxpayers. “IRS code provides measures to recover improperly issued refunds, including interest,” Lee said. “Of course, that’s refunds, and this is not a refund. The IRS hasn’t come out yet with what penalties may be levied, if any, for cashing and keeping monies from a deceased person’s stimulus check. But I’m sure they will come up with something.”

Other tax professionals aren’t as convinced.

“Until a more weaponized instruction comes out, I’d say keep it,” Ryan Ellis, E.A., said in a Press Democrat story on May 20. “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.”

On Nextdoor, rule-followers and renegades were about evenly split. “Cash the check and have a little party in your mother’s memory,” Joan Wheeler advised.

Consensus did form, on the other hand, about the government’s overall performance on the CARES Act. “D.C. is nothing if not dysfunctional,” Hilda Teran-Franklin wrote. “My husband and I are still waiting for our checks. Last I checked, we were still breathing and are up to date with filing our taxes through 2019. BTW, we’ve also had the same residence and mailing address for the last 43 years.”

With most businesses still shuttered and employees sheltering in place, getting through to the IRS has proved problematic. But if Teran-Franklin could get anyone there to answer the phone, she would likely be told: the check’s in the mail.

Email Kate at kate.williams@sonomanew.com.

As of last week, 128.3 million stimulus checks totaling $218.4 billion had been sent out to American taxpayers shut in by coronavirus, including a fair number made out to people who are no longer living.

When the U.S. Senate unanimously approved the $2.2 trillion CARES Act on March 25, it allowed that every adult taxpayer individually earning an adjusted gross income of $99,000 or less, or filing jointly and collectively earning less than $198,000, would be entitled to a $1,200 tax-free grant, excepting non-resident aliens, people in prison and the deceased.

But the day before Mother’s Day, this reporter got a text from a sibling in Santa Cruz with an image of an IRS check made out to their deceased mother. “I think our country is in trouble…” the text read, with a laughing emoji added to lighten the mood. The check was made out in their mother’s name, with “DECD” - an abbreviation for “deceased” - typed right behind it.

The error was hardly an anomaly, as it turns out.

“Our family received two of these checks,” Sonoma Valley resident Jerrilyn Moorhead replied in an informal survey the Index-Tribune posted on the social media site Nextdoor.

“I got one, too, for my partner who passed,” resident Anastasia Riley added. “Made me sad and mad at the same time.”

Denise Sobel, of Sonoma, said that she knew of four misbegotten IRS stimulus checks received by relatives of people who had passed away. “I have a friend who received a check for her husband, mother and father-in-law, all who died in the last two years. (Also) just found out that my sister got a check for her father–in-law, who died two years ago.”

Tax professional Bonnie Lee, of the local accounting and tax preparation firm Taxpertise, has been helping Sonoma Valley taxpayers navigate the IRS gauntlet for many years, and as an enrolled agent, or E.A., holds the highest credential the agency awards. She knows a thing or two about how the IRS works, and defends their errors given the scope of the stimulus. “The IRS is sending checks to anyone who filed a 2018 or 2019 income tax return. Some of these people have since passed away, but the IRS may not be aware,” Lee said. “The IRS could have cross-checked every name to a (Social Security Administration) master file before sending stimulus checks to ensure that no deceased person received a check. Can you imagine how long that would take?”

Because the stimulus money was intended to help bridge economic gaps created by shelter-in-place mandates, Lee contends that speed was perhaps rightly prioritized over accuracy. But can those checks be legally cashed?

Initially, the IRS said that they could. Then, they reversed course and said that they couldn’t.

Now, the only scenario in which the money can be legally kept is in the case of a surviving spouse. “If the person was married, the remaining spouse is entitled to half the check, so only half needs to be returned,” Lee said.

Other than that, Uncle Sam wants his money back.

If a paper check was received by a decedent’s survivors, the IRS has instructed recipients to endorse the check with the word “void” and return it by mail with a note of explanation.

If funds were directly deposited into an account, a personal check should be sent payable to “U.S. Treasury 2020EIP,” with the deceased taxpayer’s social security number in the memo, likewise accompanied by an explanatory note. In both cases repayment must be unstapled, unfolded, and without paper clips.

Compliance may come down to the honor system, however. “I don’t know if the IRS would ever figure out or care or bother to attempt enforcement activity to discover if checks were cashed and monies kept by someone other than the designated recipient,” Lee said.

Electing to hang on to a dead relative’s stimulus money is a considered gamble, to say the least. The IRS is not routinely bested by individual taxpayers. “IRS code provides measures to recover improperly issued refunds, including interest,” Lee said. “Of course, that’s refunds, and this is not a refund. The IRS hasn’t come out yet with what penalties may be levied, if any, for cashing and keeping monies from a deceased person’s stimulus check. But I’m sure they will come up with something.”

Other tax professionals aren’t as convinced.

“Until a more weaponized instruction comes out, I’d say keep it,” Ryan Ellis, E.A., said in a Press Democrat story on May 20. “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.”

On Nextdoor, rule-followers and renegades were about evenly split. “Cash the check and have a little party in your mother’s memory,” Joan Wheeler advised.

Consensus did form, on the other hand, about the government’s overall performance on the CARES Act. “D.C. is nothing if not dysfunctional,” Hilda Teran-Franklin wrote. “My husband and I are still waiting for our checks. Last I checked, we were still breathing and are up to date with filing our taxes through 2019. BTW, we’ve also had the same residence and mailing address for the last 43 years.”

With most businesses still shuttered and employees sheltering in place, getting through to the IRS has proved problematic. But if Teran-Franklin could get anyone there to answer the phone, she would likely be told: the check’s in the mail.

Email Kate at kate.williams@sonomanew.com.