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IRS mum on whether inmates, deceased will mistakenly get stimulus payments, money can be recouped

In 2009, more than 89,000 Recovery Act stimulus payments were incorrectly sent to people who were incarcerated or no longer alive at the time of payment

Updated: April 15, 2020 - 3:21pm

The Facts Inside Our Reporter’s Notebook

The Internal Revenue Service cannot say how many of the recently sent coronavirus stimulus checks are projected to go to ineligible recipients or how much of that money can be recouped – in hopes of improving on the nearly 90,000 erroneous payments sent by the Obama administration in 2009 as a result of the Great Recession.

An estimated 90 million-plus payments of as much as $1,200 per taxpayer will soon start arriving in mailboxes and electronic bank accounts as a result of the $2.2 trillion CARES Act signed into law by President Trump last month.

The IRS declined to comment Tuesday on a projection of how many direct payments could be mistakenly sent to ineligible recipients and whether the agency has a system in place to reclaim the payments.

However, Citizens Against Government Waste President Tom Schatz said Wednesday that some of those payments will inevitably go to ineligible recipients – including the deceased and incarcerated taxpayers – because the IRS is relying on tax filing records from 2018 and 2019.

"There's no doubt about that," Schatz told Just the News. "They're going to certainly have a number of issues just related to that simple fact. And the [master] file itself isn't updated," he said. "It's going to be difficult. The factor of changes in people's lives will lead to some of this money going to people who are either deceased or otherwise ineligible simply because of changes in their life." 

In 2009, the roughly 89,000 stimulus payments – officially known as economic recovery payments or ERPs – totaling $24.4 million were incorrectly sent to people either incarcerated or no longer alive at the time, as part of the then-President Obama's Recovery and Reinvestment Act.

In an effort to safeguard against such lapses again, the Social Security Administration’s inspector general issued several recommendations in September 2010 to prevent direct payments from being sent to "ineligible beneficiaries" in a future stimulus package that's enacted into law.

“Work with Treasury to obtain the authority to reclaim ERPs issued to deceased beneficiaries,” the inspector general recommended in the report. “Take appropriate action to terminate the records for [deceased] Prouty beneficiaries to prevent further erroneous payments from being issued to these individuals.”

According to the IG report, “Prouty beneficiaries” refers to “benefits for men who were age 72 before 1968 with little or no opportunity to obtain Social Security coverage during their working years” and “widows who were age 72 before 1970 whose husbands died without Social Security coverage also qualified for these benefits.”

The inspector general also recommended the agency make sure that ERPs are not issued to incarcerated beneficiaries in future stimulus packages. 

Schatz said another factor that will lead to ineligible recipients getting stimulus money is the IRS relying on data submitted to the federal government from states about deceased taxpayers and inmates.

"The death file, as it's called, is always out of date and that's always a problem either for normal Social Security payments and certainly in this case for the stimulus checks as well coming to dead people," he said. "It's going to happen. There's no way to avoid it because the information is not up to date and the IRS does not have the most advanced technology, as we know. It's always going to create problems simply because it is not efficient."

Earlier this week, the SSA’s Inspector General’s Office referred questions about the direct coronavirus payments to the Treasury Department and the IRS. 

The IRS declined to comment on whether it would be able to reclaim any electronic payments to individuals who have died or are in jail or whether the agency. Treasury and the Social Security Administration did not respond to a request for responses to those questions.