IRS shouldn’t claw back $1.4 bil­lion sent to dead peo­ple

The Washington Post Sunday - - BUSINESS - Michelle Sin­gle­tary THE COLOR OF MONEY michelle.sin­gele­tary@wash­post.com

The U.S. Gov­ern­ment Ac­count­abil­ity Of­fice (GAO) has is­sued a re­port with the ex­plo­sive news that al­most 1.1 mil­lion stim­u­lus pay­ments to­tal­ing nearly $1.4 bil­lion were sent to dead peo­ple. Don Moore’s de­ceased wife of 42 years was one of the mil­lion.

Moore’s wife, Elaine, died last year at 66. But the IRS sent him a let­ter dated May 13 say­ing the cou­ple would be get­ting $2,400 in stim­u­lus money, which would be di­rect-de­posited into their bank ac­count. The let­ter clearly as­sumed Elaine Moore was alive and, hence, el­i­gi­ble for stim­u­lus funds.

“We hope this pay­ment pro­vides mean­ing­ful sup­port for you at this time,” said the let­ter signed by Pres­i­dent Trump.

The Coro­n­avirus Aid, Re­lief, and Eco­nomic Se­cu­rity (Cares) Act pro­vides up to a $1,200 eco­nomic im­pact pay­ment for in­di­vid­u­als and up to $2,400 for tax­pay­ers fil­ing a joint re­turn. But the dis­tri­bu­tion has been be­set by glitches — in­clud­ing checks sent to dead peo­ple.

The op­tics of send­ing stim­u­lus pay­ments to dead peo­ple didn’t look good for the ad­min­is­tra­tion. So, in an off­hand com­ment on April 17, Trump said the pay­ments should be re­turned. “Some­times you send a check to some­body wrong,” Trump said in a coro­n­avirus task force press brief­ing. “Some­times peo­ple are listed, they die, and they get a check. That can hap­pen. … We’ll get that back.”

But no­body from the IRS com­mu­ni­cated this di­rectly to Moore.

(The Florida wid­ower hasn’t re­ceived a stim­u­lus pay­ment any­way, not for him­self, nor his wife — but that’s be­cause of a whole other se­ries of un­re­lated IRS glitches, too nu­mer­ous to re­count here).

For many sur­viv­ing spouses, adult chil­dren and es­tate ad­min­is­tra­tors, the con­fus­ing sig­nals have cre­ated anx­i­ety over what to do with the pay­ments — and the prospect that the IRS could go after peo­ple who have al­ready spent the stim­u­lus money.

Moore learned his wife wasn’t en­ti­tled to the pay­ment only after he made half a dozen calls to the num­ber listed in the let­ter bear­ing Trump’s sig­na­ture, a doc­u­ment the IRS is re­quired to send un­der the Cares Act. Even­tu­ally, Moore was able to reach a live IRS rep­re­sen­ta­tive who told him he was only en­ti­tled to $1,200.

“It’s frus­trat­ing,” Moore said. “Un­for­tu­nately there is enough stress with the death of a spouse without the IRS adding more.”

To make mat­ters worse, this mis­step was en­tirely avoid­able.

In 2013, the GAO iden­ti­fied weak­nesses in IRS pro­cesses that al­lowed pay­ments to be made to de­ceased in­di­vid­u­als. The watch­dog agency rec­om­mended cor­rec­tive ac­tions, which the IRS put in place. The agency is sup­posed to use death records to up­date tax­pay­ers’ ac­counts to pre­vent im­proper pay­ments.

But in the rush to get out the stim­u­lus pay­ments, this process was sidesteppe­d.

“By­pass­ing this con­trol for the eco­nomic im­pact pay­ments, which has been in place for the past seven years, sub­stan­tially in­creased the risk of po­ten­tially mak­ing im­proper pay­ments to dece­dents,” the GAO said in its re­port.

In re­sponse, the IRS said on its web­site Fri­day that it has taken ac­tion to pre­vent fu­ture pay­ments to dead peo­ple.

Gayle Grif­fith is ad­min­is­ter­ing the es­tate of a friend, who died last Novem­ber.

Un­der the Cares Act, es­tates aren’t el­i­gi­ble for a stim­u­lus pay­ment. Yet, Grif­fith re­ceived a let­ter from the IRS dated May 15 in­di­cat­ing her friend, Joan Duprey, who had lived in Honolulu, would re­ceive a $1,200 stim­u­lus pay­ment by check or a debit card. But next to Duprey’s name were the let­ters “DECD,” in­di­cat­ing the IRS knew she was de­ceased. The promised funds haven’t ar­rived yet.

Even with the fed­eral deficit at an all-time high, try­ing to chase down $1.4 bil­lion — a tiny per­cent­age of the $2.2 tril­lion stim­u­lus pack­age — is fu­tile, and un­fair to the re­cip­i­ents, given that the IRS has a sys­tem in place that should have largely avoided send­ing stim­u­lus pay­ments to dead peo­ple in the first place.

On May 6, the IRS is­sued guid­ance about in­el­i­gi­ble pay­ments. To find the in­for­ma­tion, re­cip­i­ents had to know to go to the agency’s Eco­nomic Im­pact Pay­ment In­for­ma­tion Cen­ter page at irs.gov and nav­i­gate through the fre­quently asked ques­tions. “In­el­i­gi­ble pay­ment re­cip­i­ents who do not visit IRS’s web­site or do not have In­ter­net ac­cess may not be aware of the process to re­turn pay­ments,” the GAO re­port said.

The IRS doesn’t even have a plan to di­rectly no­tify in­el­i­gi­ble re­cip­i­ents on how to re­turn pay­ments, the GAO said.

“If they don’t pro­vide a timely, clear way for peo­ple to send the money back, I don’t think that’s right to ap­proach peo­ple to get it back,” said Grif­fith, who says she’ll re­turn the money if it ever ap­pears. “Eth­i­cally, I be­lieve it should be given back. No ques­tion in my mind. But prac­ti­cally, I don’t think they’ve cre­ated a sit­u­a­tion where peo­ple can eas­ily do that.”

With the IRS still field­ing a re­duced staff be­cause of the pan­demic, their at­tempts to snatch back the stim­u­lus money aren’t cost-ef­fec­tive. The IRS is al­ready over­whelmed, with the tax dead­line de­layed un­til July 15. Mil­lions of pa­per re­turns with re­funds due must be pro­cessed. Tax fraud­sters try­ing to steal a lot more than $1, 200 have to be pur­sued.

The agency is still try­ing to send le­git­i­mate stim­u­lus pay­ments to el­i­gi­ble Amer­i­cans.

“As of to­day, I still haven’t re­ceived a re­lief check, and I’m a non-fil­ing So­cial Se­cu­rity re­cip­i­ent,” said Guy Walker from Hills­dale, N.Y.

Is the IRS re­ally go­ing to al­lo­cate re­sources to track down sur­viv­ing spouses or heirs to re­cover stim­u­lus money the re­cip­i­ents hon­estly didn’t know they couldn’t spend? After all, the in­tent of the eco­nomic im­pact pay­ments was to stim­u­late the econ­omy.

Yes, it’s shock­ing that $1.4 bil­lion in stim­u­lus pay­ments were sent to dead peo­ple. But it’s too late for the IRS to try to claw back those funds. Let it go.

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