Personal Finance

IRS sends coronavirus stimulus checks to dead people

Key Points
  • The Internal Revenue Service began depositing coronavirus stimulus payments into Americans' bank accounts over the past several days. 
  • Some of that money made its way into the accounts of deceased individuals. 
The seal of the Internal Revenue Service (IRS) hangs on a podium during an IRS Criminal Investigation 100th year anniversary event at the agency's headquarters in Washington, D.C., U.S., on Monday, July 1, 2019. Photographer: Andrew Harrer/Bloomberg via Getty Images

An unlikely group counts itself among the recipients of the coronavirus stimulus checks: the dead.

The IRS began distributing $290 billion in direct cash payments within the past week as part of the $2 trillion CARES Act stimulus bill. As part of the plan, IRS is sending checks of up to $1,200 per individual and $2,400 per married couple over the past several days to weather the economic crisis caused by the coronavirus pandemic.

However, the agency directed some of the one-time payments to bank accounts of deceased individuals, USA Today reported this week.

It's not immediately clear how many deceased people received the direct deposits.

More from Personal Finance:
How Americans plan to spend their relief checks
What to do if you can't pay your credit card bills
Scammers looking to steal your stimulus check

Rep. Thomas Massie, a Republican from Kentucky, said Wednesday a friend texted him to say his father, dead since 2018, had just received his $1,200 in stimulus money, according to MarketWatch.

"We're aware of all the survivor-related questions and we're still working that issue," IRS spokesman Eric Smith said. The  Treasury Department did not immediately respond to a request for comment.

This isn't the first time the federal government has issued stimulus checks to the dead.

More than 71,500 dead Social Security recipients received $250 stimulus payments under the American Recovery and Reinvestment Act, according to a 2010 report from the Social Security Administration's Inspector General. Deceased Social Security recipients got $18 million of the $13 billion set aside for all Social Security recipients in that Obama-era stimulus package.

How to spend a stimulus check if you're employed

The IRS may have made this latest snafu due to the administrative resources at its disposal and the speed with which the agency has been trying to issue the one-time payments, according to tax experts.

"It could be happening because the records on the date of death are not complete or, in the rush to get money out, the IRS did not have time to match the date-of-death data to the tax return," according to Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center. 

The IRS largely relies on the SSA for up-to-date death records, experts said. But that information could take anywhere from a few months to a year or more to trickle in after someone's death, according to Leonard Burman, co-founder of the Urban-Brookings Tax Policy Center.

The IRS would also likely have relatively timely death information on file from a final annual tax return the law requires surviving family members and estate executors to file on behalf of a deceased individual. The return would indicate that the taxpayer has died. 

However, if an individual died in 2019 and their most recent tax return on file was for 2018, it's conceivable the deceased could have received a $1,200 stimulus payment, according to Holtzblatt. 

That's because the IRS based the size and receipt of stimulus payments on a taxpayer's 2018 or 2019 tax return, whichever was filed most recently. 

One outstanding question is whether a deceased individual's surviving spouses, family members and others would have to refund the money to the IRS. The IRS and Treasury Department have yet to provide a clear answer, experts said. 

"Is that OK? Can they keep it? That's the big question," Holtzblatt said. 

Ex-con man says these physical forgeries are making a comeback

Here's another unanswered wrinkle, according to Holtzblatt: If the IRS accidentally tries to send a stimulus payment to a deceased individual and the money bounces back because the bank account on file is closed or the mailing address is invalid, will the IRS keep that money or is a surviving family member entitled to the funds? 

There's one clue from the CARES Act that may hint at their being able to keep the payments, experts said. Americans who received a larger stimulus payment than they should have can keep the extra funds, according to the law. 

This may apply to someone who, for example, got a raise in 2019 but whose stimulus payment was based off their 2018 tax return with lower income. Those making more than $99,000 aren't eligible to receive the payments. 

This is a developing story. Please check back for updates.

How scammers are exploiting the tax deadline extension