My son's stimulus check arrived in the mail yesterday and I noticed that on the envelope there was a check-box for indicating that the recipient was deceased. Along with instructions to check the box and then drop it in a mailbox. So it seems that at least with the physical checks, the IRS is asking for them to be returned.
As for other cases, I noticed the following rather unhelpful statement from an IRS spokesperson reported in "IRS is sending funds to the dead", Los Angeles Times, April 27, 2020, pB1, B5:
"An IRS spokesman told The [Los Angeles] Times that the agency is 'very aware' of the situation, considers it a high priority and is working on getting the public some answers."
As executor of an estate, I too received a snail mailed $1200 stimulus check on behalf of the deceased. Thank you for pointing out what the envelope has on it. My envelope says the same. But I think complicating this is the fact that the check itself is made out as follows:
JONA SMITH DECD JEAN JONES PER REP
1234 Main Street Anytown, XY 67890
If this were a refund for the deceased's final form 1040, would the snail mailed check arrive in the same envelope? Would the check be made out to the deceased and personal representative (executor) of the estate as shown above?
The IRS is admitting it is making other mistakes in sending stimulus checks out. For these other mistakes, there are signs that the IRS is not going to try to get back the money.
I am hesitant to return the check given the conflicting information.
Thank you for posting this. I completely missed what was printed on the envelope. Maybe I missed it because: Social Security was promptly informed of the death last August. I submitted the required documents to the IRS stating I am executor. I submitted the decedent's final Form 1040 prominently noting (as completed by the software) that this was the final form 1040 for a decedent.
I am satisfied waiting a few months until the IRS's team of attorneys figures out what to do. I think one reason they may be dragging their feet is because, the IRS is in a dilemma. Either (1) announce that estates may keep the checks and distribute them to beneficiaries; or (2) the IRS will try to claw back checks from estates while ignoring the many checks sent out incorrectly to others. I think the first choice will cause a public outcry. I think the second choice will result in demands to go after all the checks that were sent out when they should not have been.
I started another thread on this several days ago.
One would think it would take very little effort for the IRS to release a definitive statement. "Direct deposits should returned to [address] via check/mo with a note with XXX details. Checks should be sent, with VOID written with black marker across the front, to [address]. "
When Munchkin first talked about delaying Tax Day, there were days of confusion. Was the delay for payment due, or for filing as well? IRS needs to get clarification and make a statement, in an official format. They know how to do this, still.
[Note - to be clear, I am not offering a position on this. The check made payable to my dear, departed, MIL sits on my desk, uncashed. Until the IRS makes a formal declaration, all else is speculation.]
Equally or perhaps more problematic will be joint checks when one spouse has died. Returning the check delays benefit to the surviving spouse. Cashing the check leaves the surviving spouse on the hook for the deceased's share.
Based on what happened around 2010, it seems conceivable that the IRS will "ask" for the stimulus payments (made out to decedents/estates) to be returned; provide the procedure for accomplishing this; but also be completely vague about whether a return of the stimulus payment is legally required. For example:
====Start Excerpt from Marketwatch.com article===== 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, the report said.
About half of those checks were returned, the Inspector General report estimated, when reviewing a sample of 50 beneficiaries.
?People may have returned it, but they didn?t need to,? said Nina Olson, the former head of the Taxpayer Advocate Service, an internal IRS watchdog. The same goes for the $1,200 stimulus payments, as far as Olson sees it. The CARES Act stimulus bill contained no ?clawback? provisions for stimulus checks sent to a dead person, meaning the agency can?t retrieve the money after it?s been handed out, she said. ?Congress didn?t write around that this year,? she said. =====End Excerpt=========
To me this may leave some personal representatives in a quandary: Does the personal representative (PR) have a duty to the estate to distribute the stimulus check to the beneficiaries? Or should the estate and the PR be "shamed" into returning money from the U. S. Treasury that, if push comes to shove, legally belongs to the estate?
If either 364 days go by without clarification here, or this coming clarification does not sound like it has the law behind it, I will likely send the $1200 to the charity that is the estate's beneficiary and not think twice about it. It's my "Whatever" response, in the belief that the IRS is unlikely to come after me.
Give it a few more months, and as food shortages start, this may be the least of one's worries.
Here is a detailed analysis of why EIP payments to decedents do not need to be returned to the IRS, notwithstand I'll provide my analysis, which is in several threads on the WebBoard. The simple situation is a single individual who died on July 1, 2018. His final Form 1040 for the period January 1, 2018 to July 1, 2018 was filed timely.
Under IRC 6428(f)(1), the advance stimulus payment is based first on the 2019 return. This section states:
(f) ADVANCE REFUNDS AND CREDITS.--- (1) IN GENERAL.---Subject to paragraph (5), each individual who was an eligible individual for such individual's first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.
So, this section states that an individual who was an "eligible individual" for the individual's year beginning in 2019 shall be entitled to the advance stimulus payment. The individual in our example fails this test because he died in 2018.
Under IRC 6428(f)(5), if no 2019 return has been filed, then the advance stimulus payment is based on the 2018 return. This section states:
(5) ALTERNATE TAXABLE YEAR.---In the case of an individual who, at the time of any determination made pursuant to paragraph (3), has not filed a tax return for the year described in paragraph (1), the Secretary may--- (A) apply such paragraph by substituting "2018" for "2019", and * * *
So, this section states that if the individual has not filed a 2019 return, then the IRS may substitute "2018" for "2019" in IRC 6428(f)(1). As a result, an individual who was an "eligible individual" for the individual's year beginning in 2018 shall be entitled to the advance stimulus payment. The individual in our example satisfies this test because he was alive beginning in 2018, and therefore, he is entitled to a $1,200 advance stimulus payment.
IRC 6428(e)(1) provides that the $1,200 advance stimulus payment doesn't have to be paid back. This section states:
(e) COORDINATION WITH ADVANCE REFUNDS OF CREDIT.--- (1) IN GENERAL.---The amount of credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (f). Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).
Under IRC 6428(d)(3), an estate is not an "eligible individual." The amount of the credit for 2020 is zero because the individual died in 2018. Under IRC 6428(e)(1), the zero credit is reduced by the $1,200 advance stimulus payment, resulting in a number that is below zero. As a result, the advance stimulus payment doesn't have to be paid back due to the "(but not below zero)" language.
Some might point to the word "may" in IRC 6428(f)(5) (above) and say that the IRS doesn't have to substitute "2018" for "2019," and this gives the IRS the right to demand that the advance stimulus payment be paid back. But if the $1,200 payment has already been made to an individual who died in 2018, then the IRS has already used its discretionary power, has chosen 2018 as the alternate taxable year upon which to base the advance stimulus payment, and therefore may not demand repayment.
Unless and until Congress changes the law, checks issued under this statute to an eligible individual who died during 2018 are proper. The same applies to an eligible individual who died during 2019, or who died during 2020 but before the IRS made the determination to issue an advance stimulus payment.
On Friday, May 8, 2020 at 11:55:36 AM UTC-6, ira smilovitz wrote: [Quoting David M. Fogel, EA, CPA US Tax Court Practitioner, apparently posting at webboard.naea.org, a private web site?] [snip]
To process the above, and for a person who died in 2019, I had to think this through as follows:
For the "taxable year," is the "individual" (whose 2019 Form 1040 was filed with "Deceased" et cetera printed at the top) an estate?
The 2019 Form 1040 was prepared by the estate's representative. The Form 1040 was not prepared using income into the estate. The income tax paid on a Form 1040 is income tax paid because of income a living individual received during 2019.
Nina Olson and others said several weeks ago that the estates of dead people may lawfully receive the stimulus payment on the basis of the AGI on their final 2019 Form 1040.
At this writing I believe Ms. Olson and these other folks are correct.
If anyone sees this differently, I would be interested in your comments.
Next I get to try to claw back the check I mailed to the IRS "immediately" per the IRS's direction.
The stupidity and disgust I have with myself and the IRS runs deep.
Yes, I see the major "problem" is that many people think the decedent and the estate are the same thing, just on opposite sides of the date of death. They are separate legal "persons".
I am reading the CARES Act, and see the following:
SEC. 6428. 2020 RECOVERY REBATES FOR INDIVIDUALS. (a) IN GENERAL.?In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2020 an amount equal to the lesser of . . .
Right. Here's what it says in section 6428(f)(3)(C):
"Except in cases of fraud or reckless neglect, no liability under sections 3325, 3527, 3528, or 3529 of title 31, United States Code, shall be imposed with respect to payments made under this subparagraph."
Correct. The subparagraph Stu cited does pertain to liability of government officials. I don't know why he quoted that. The paragraph you couldn't find (6428(f)(5)) is:
?(5) ALTERNATE TAXABLE YEAR.?In the case of an individual who, at the time of any determination made pursuant to paragraph (3), has not filed a tax return for the year described in paragraph (1), the Secretary may?
?(A) apply such paragraph by substituting ?2018? for ?2019?, and
?(B) if the individual has not filed a tax return for such individual?s first taxable year beginning in 2018, use information with respect to such individual for calendar year 2019 provided in?
?(i) Form SSA?1099, Social Security Benefit Statement, or
?(ii) Form RRB?1099, Social Security Equivalent Benefit Statement.
The questions arising from the CARES Act are interesting. I hope those with significant credentials will continue to put up with my efforts to get a handle on the tax law here. Here's my take on answer to the above question:
=== Start Excerpt === (a)When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof?
(1)Person The term ?person? shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation. . . . (14)Taxpayer The term ?taxpayer? means any person subject to any internal revenue tax.
===== End Excerpt ===
Deceased individuals are obliged to pay income tax on their final Form 1040. While the funds for paying this income tax may come from the decedent's estate, the income tax owed is based on the deceased individual's income for the period she or he was alive during the tax year. The income tax is not a tax on the estate per se. It is a tax on the deceased individual's income while alive.
Likewise, a deceased individual can recover credits, like the Earned Income Tax Credit, on their final Form 1040. The EITC money will end up in the estate, but again, the EITC credit is not a credit to the estate per se. It is a credit to the dead person.
To me, all of the above indicate that an "individual" may be a dead person.
I think Ira concisely nailed the difficulty laypeople like myself were (or are) having: Laypeople are thinking that "estate" and "dead person" are the same thing in tax law. This is not so.
Questions similar to the above have arisen in, for one, lawsuits about who is and is not required to pay taxes. On this issue of whether a 'dead person' is entitled to a stimulus payment, I continue to try to parse the language. I am especially pondering David Fogel's argument. (I would bet this is Nina Olson's argument as well.) I am trying to see if I can find any holes in David's reasoning. I think of hypotheticals and try to see if David Fogel's reasoning still holds water. E.g. suppose the IRS was in court arguing against Nina and David that the stimulus checks sent to dead people are "erroneous refunds."
Internal Revenue Service: Your honor, the CARES Act says estates are not eligible individuals. This supercedes IRC Section 6428 (f) (1).
Nina Olson: Your honor, being a "dead person" is not the same as being an "estate." [Olson reviews all the arguments I made to date in misc.taxes.moderated, thanks to Ira's excerpt of David Fogel's discussion.]
Internal Revenue Service: Your honor, please consider that, if a stimulus check had not been sent to the dead person, then the CARES Act does not give the dead person a way to force the IRS to issue a check. The CARES Act gives individuals who are alive the chance to claim the stimulus dollar amount on her or his 2020 Form 1040. But of course, in 2021, no person who died in 2018 or 2019 can file a 2020 Form 1040. To the IRS, it is clear that Congress did not intend for dead people to receive the stimulus payment.
Nina Olson: We are trying to divine Congress's intent here. The CARES Act limits the time the Sec Treasury has to send out stimulus checks. Section 6428 (f) (3) prohibits advance refunds to be sent out after Dec 31, 2020. The CARES Act necessarily put a time limit on this rush to send out the people's money in the form of an "advance credit" or "advance refund" on people's 2020 income taxes. I do not think it is inconsistent to say Congress wanted this money flowing through the veins of the economy as quickly as possible, so yes, Congress absolutely intended for some dead people to get the money. Their heirs et cetera benefit from the stimulus payment. The stimulus payment is accomplishing its objective. On the other hand, there is this time limit, and the IRS has some discretion in sending out checks. On the third hand, once the check is sent to a dead person, then there is no way the IRS can lawfully re-claim it.
Judge: I have a ruling. Is there a conflict between 6428 (d) (3) and 6428 (f) (1)? No. Those dead people (dying in either 2018 or 2019) who received stimulus checks in 2020 get to keep them.
However, no 'dead person' may have her or his agent stand in court and demand that the IRS send the dead person the amount of her or his stimulus payment. The CARES Act is uni-directional: The IRS decides who the IRS will send a refund in advance of filing in 2021 a 2020 Form 1040 tax return. Members of the public (dead or alive) do not get to tell the IRS (or make demands of the IRS) to send the stimulus payment in 2020. When 2021 comes, everyone who is legally permitted to file a tax return may get the stimulus payment (if they have not already) in the form of a refund/credit. In 2021, the Internal Revenue Code prohibits those who died in 2018 or 2019 from filing an individual tax return. So in this respect and by 2021, the decedents are out of luck.
Internal Revenue Service and Ms. Olson, on the issue of whether dead people receiving stimulus payments in 2019 may keep these payments, I rule for the dead people.
It is easy to win your argument when you get to play both sides and the judge to boot! :)
I don't buy your argument that a dead person is "an individual". When a person dies, his liabilities and credits with respect to his Individual Income Tax ends, even though his representative may deal with such matters after his death.
I bet the IRS punts and does nothing other than beg for the money back. The people who pay the vast majority of the taxes are not getting any stimulus checks, so the IRS will let the rest off the hook.
-- "dead person" and "estate" are synonymous (with no citation from the IRC to back up your contention)
-- IRC Section 6428 (d) prohibits estates from being "eligible individuals";
-- Therefore, dead people are not eligible to receive the stimulus payment.
To me the problem with your argument is that --
-- numerous IRS publications and sections of the IRC refer to "the individual." In the case of a final Form 1040 for someone who died, this frequently refers to a "dead person."
-- nowhere does the IRC say an "individual" may not be a dead person.
If it's just "common sense" to you, then I think that's why CPAs, EAs, tax attorneys and the like are paid the big bucks.
It's not 'my argument.' It is David Fogel's and I bet Nina Olson's. I wanted to see if I could rebut it. After a lot of study, I cannot.
If you do not believe me, consider that I returned the stimulus payment, made payable to a dead person, to the IRS earlier this week. This is because I was naively dug into "estates" = "dead people." I wish I felt right now that I was correct to return the check to the IRS. I would feel a lot better. Instead, and after reviewing David Fogel's reasoning, I feel that the stimulus check did lawfully belong to the estate, and the IRS would have no legal possibility of clawing it back from me. I should have kept the check and distributed it to the beneficiary.
It is demoralizing realizing I committed a mistake that shortchanges the beneficiary (a charity) $1200.
I am not beating myself up too much. But I am feeling dismayed and sad about it.
I'm still holding the check. In my case, it's payable to my mother in law who passed in October. I am the executor of her estate, and trustee of her trust. The beneficiaries are my wife and sister in law. Since we don't need or want the money, it's my job to manage it and disburse funds to her at least annually. It's $1200 that for her can make a difference as she's working but running paycheck to paycheck.
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