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Some inmates receiving coronavirus stimulus payments, watchdog warns

Concerns raised IRS won’t be able to reclaim all of the payments that it’s sending out incorrectly.

Updated: April 22, 2020 - 10:22am

The Facts Inside Our Reporter’s Notebook

Some inmates are receiving the $1,200 coronavirus economic stimulus payments that are part of the $2.2 trillion CARES Act, according to a government watchdog.

“We have no doubt that inmates are receiving checks for the same reason dead people are receiving checks,” Tom Schatz, president of Citizens Against Government Waste, told Just the News.

“The IRS is relying on 2018 or 2019 tax returns, and does not know whether the taxpayer is deceased, incarcerated, or divorced, all of which, among other factors, would impact their eligibility to receive stimulus checks today,” he also said.

A similar scenario played out under then-President Obama's Recovery and Reinvestment Act, when 17,348 prisoners mistakenly received $4.3 million in economic recovery payments (ERPs), according to a 2010 Social Security Administration Inspector General report.

According to a congressional source, the IRS would not be aware, at this time, if an individual who filed tax returns in 2018 or 2019 has since went to jail or died, which leads to direct payments issued incorrectly.

The IRS won’t be able to recoup all of the payments sent out incorrectly, according to a retired investigator at the IRS, who spoke on the condition of anonymity. The direct payments went out quickly after the CARES Act passed, which the former investigator said raises the risk of mistakes being made.

Spouses of inmates sometimes continue to use their Social Security number on tax returns to claim tax credits while their partner is in prison, the retired investigator said. Therefore, any direct stimulus payments sent to inmates would go to a bank account still used by their spouse or sent to the inmates’ former home address in the form of a check.

In some cases, an inmate might be working with a person from the outside to generate fraudulent tax returns with their Social Security number. Tax fraud from prison poses a problem for the IRS each year. In 2015, for example, 24,000 fraudulent tax returns, totaling $1.3 billion, were filed using Social Security information from individuals who were incarcerated.

“There’s a lot of tax fraud that goes on from prison,” the former investigator said.

The IRS declined to comment when asked how the agency plans to recoup the funds sent to ineligible recipients like inmates. The Treasury Department and the Social Security Administration didn’t return requests for comment.

Schatz said Treasury and the IRS will probably choose not to pursue reclaiming the funds in most cases.

“The inmates, like other recipients of checks for which they are not eligible, can voluntarily return the money. For those that do not pay it back, the IRS can attempt to recover the money, although given the relatively small amount being provided to each person, there should be an analysis of whether the cost is worth the benefit,” Schatz said.

“For example, it makes more sense to spend time attempting to collect tens of thousands of dollars of unpaid taxes from an individual or business taxpayers, but it is less cost-effective to try to collect a few thousand dollars. The same calculation would apply to improper payments, which would be the category in which the stimulus checks would fall,” he added.

The Federal Bureau of Prisons also did not respond to requests for comment about the direct payments in the stimulus package. 

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