- The $1,200 stimulus payments authorized by the CARES Act legislation are based on past tax returns.
- Because of that, some checks are going out to deceased Americans.
- Now, Treasury Secretary Steve Mnuchin says families are on the hook to return that money.
If you received a stimulus check for a deceased relative, you should think twice before spending that money.
Treasury Secretary Steve Mnuchin told The Wall Street Journal that he expects families who receive those checks to return the money.
"You're not supposed to keep that payment," Mnuchin told the paper. "We're checking the databases, but there could be a scenario where we missed something, and yes, the heirs should be returning that money."
The $2 trillion CARES Act authorized the government to send payments of up to $1,200 per qualifying American, plus $500 for their dependents under 17.
To qualify, you must have adjusted gross income under certain thresholds — $75,000 if you are single or $150,000 if you are married and filing jointly. If you earn above those amounts, your stimulus check will be reduced and phase out completely at $99,000 in income for individuals and $198,000 for married filing jointly.
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That information is based on past tax returns for either 2018 or 2019, whichever is most recent.
Because someone could have filed for those years and passed away, they could still get a stimulus payment.
"We will be issuing guidance on this shortly," a Treasury Department spokeswoman said.
On the other hand, those who are alive and receive more stimulus money than they should are allowed to keep it, according to the CARES Act legislation. Those who receive less than they should will get the money due them when they file their 2020 tax returns.
It's not the first time this has happened. Following the Financial Crisis, more than 71,500 deceased Social Security beneficiaries received $250 payments through the American Recovery and Reinvestment Act.
The current slip-ups may be due to the IRS not getting the most up-to-date information from the Social Security Administration, said Garrett Watson, senior policy analyst at the Tax Foundation.
Pursuing the money after it's already been sent could be difficult for the government, Watson said. Meanwhile, other errors are cropping up due to the urgency with which the checks have been deployed.
"If they're thinking about going forward and trying to chase people down for that money, that's probably not the best way to instill trust in the process," Watson said. "It will cause a lot of confusion, too."
A better way might be to only pursue the money if there's evidence of deliberate fraud, Watson said. Not clawing it back would be consistent with how they're treating other overpayments, he said.
If the IRS does decide to reclaim checks that went out to the deceased, they may want to differentiate the rules for those who died in 2018 or 2019 versus those who passed away this year, Watson said. The estates of individuals who died in 2020 may have an obligation to file a tax return next year on their behalf.