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Deceased Taxpayers & Stimulus Payments

Recently the Treasury Secretary, Steve T Mnuchin, stated any Economic Impact Payments (Payment) issued to an individual who died prior to the receipt of the Payment must be returned to the government.

IRS has FAQs on its web site, irs.gov, under a heading of “Economic Impact Payment Information Center”. These FAQs have been updated many times.

Q10 say: Does someone who died qualify for the Payment? (added May 6, 2020)

A10 says: No. A Payment made to someone who died before receipt of the Payment should be returned to the IRS by following the instructions in the Q&A about repayments [currently Q#41]. 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. This amount will be $1,200 unless adjusted gross income exceeded $150,000.”

The Economic (Stimulus) Impact Payment within the code states the CREDIT actually allowed on the 2020 return based on the 2020 return information is reduced, but not below zero, by any “advance refund payment” received as provided under the code. (IRS calls this “advance refund payment” an “Economic Impact Payment”, or “Payment” for short.) In other words, any PAYMENT to a taxpayer will reduce the actual credit calculated on the 2020 return to arrive at any additional CREDIT the taxpayer is entitled to. In most taxpayers’ situations, the PAYMENT will be exactly the same as the amount of CREDIT calculated on the 2020 return, so these taxpayers will NOT receive any additional monies when they file their 2020 returns. However, if a taxpayer’s situation has changed, such as having another child during 2020, the taxpayer will receive the additional CREDIT on the 2020 return. If the taxpayer received more in PAYMENT than the actual CREDIT, the taxpayer is NOT required to repay the excess.

So, a taxpayer who died in 2019 (or 2018 if IRS used the 2018 return data) is not an eligible individual, therefore, any PAYMENT received for this taxpayer should not have been made by IRS.

Will IRS be actively pursuing taxpayers to get these improper PAYMENTS returned? We don’t know. Technically, IRS should pursue returns of ALL improper PAYMENTS (deceased individuals, those incarcerated, taxpayers eligible to be dependents who improperly claimed themselves, etc.). But will IRS actually do so? We don’t know.