June 9, 2020 by Philip Lewenstein

Stimulus Checks to the Deceased: What Would You Do?

About noon on May 4, I opened my mailbox and was surprised to find an envelope with a check for $1,200 from the United States Treasury to my mother, care of me, first name misspelled. It was particularly surprising because my mother passed away March 31, 2018, more than two years ago. Next to her name were the letters “DECD.” At the bottom left of the check were the words “Economic Impact Payment, President Donald J. Trump.”

As part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, individuals with a Social Security number who earn up to $75,000 a year in adjusted gross income receive the full $1,200. Married couples who file joint returns receive up to $2,400 if their adjusted gross income is under $150,000. Families receive another $500 for children under 17.

Why would the government be sending a check to someone who passed away that long ago? Certainly, the government is inefficient at times, and the IRS was in a hurry to send the payments to millions of citizens negatively affected by COVID-19.

The IRS is not the only institution sending checks to deceased people. In April, Wells Fargo sent my mother a reminder to deposit a check sent to her December 17, 2019. I contacted Wells Fargo Customer Remediation to inform the department that my mother had died two years ago and the name on the check needed to be changed. At the department’s request, I filled out a form for the check to be sent in my name, and I enclosed a death certificate. A month later, the check for $17.43 arrived—made out to my mother.  

Several days after the IRS check arrived, a letter from The White House, signed by President Donald J. Trump, came, notifying my mother that she is receiving an Economic Impact Payment of $1,200 with the “hope that this payment provides meaningful support during this period.” My mother, who was 99, paid a lot of taxes in her lifetime.

My mother would not have been particularly excited to receive a check with Trump’s name or a letter from him. She was a Democrat, and she supported strong female candidates, voting, of course, for Hillary Clinton in 2016. My mother believed in and practiced civility. She knew Trump’s name, but having lost some cognitive ability in her last years, she was spared the pain of fully grasping Trump’s many transgressions.

Once, it was an honor to receive a letter from the White House. My third-grade class sent a letter to President Dwight D. Eisenhower in the mid-1950s. He replied, and I and a classmate were pictured in the Duluth News Tribune displaying the letter. Eisenhower, a two-term Republican president, was a symbol of honor, civility, and respect for the United States.

I found several news articles from April, when the IRS began sending payments, reporting on checks sent to deceased people. I went to the IRS website but found no information on this issue although Trump and Treasury Secretary Steven Mnuchin said publicly that money sent to deceased taxpayers should be returned.

Formal guidance from the Treasury Department came May 6, when the IRS updated its website, saying that if a person died before the payment was issued, the money should be returned. The website, in a lengthy FAQ section, provides instructions on how to return the funds. Although the IRS explained what the heir of a dead person should do, it did not state the consequences for not returning the money.

Meanwhile, while trying to fathom the idea of checks to deceased taxpayers, I read troublesome reporting that said many people affected negatively by the pandemic and desperately needing assistance had not received their payments.  

As of early May, the Treasury Department had sent $200 billion to more than 130 million  citizens; about $3.7 billion of that had landed in the mailboxes and bank accounts of more than two million Minnesotans, according to Star Tribune reporter Jackie Crosby (“Minnesotans endure frustrated wait for much-needed stimulus check from the IRS,” May 11, 2020). Based on tax returns and other estimates, at least one million Minnesotans could still be looking for the money.

Many Minnesotans are frustrated and annoyed with the delay in receiving their payments as well as the difficulty in calling the IRS or finding their information on the IRS website. Other Minnesotans are frustrated with the cutoff age of 17 for the dependent bonus. Minnesota Sen. Tina Smith and Rep. Angie Craig are pushing to expand eligibility for the $500 credit to all dependents in a family, including college students up to age 24 and those with disabilities, Crosby reports.

Why did the error occur? When the IRS began sending stimulus checks, it didn’t have safeguards in place to prevent sending the checks to those who recently died; in fact, checks are based on 2018 and 2019 tax returns. Thus, some estates are receiving stimulus checks for people who passed away in 2018. My mother paid taxes for the first three months of 2018.

 The Social Security Administration (SSA) maintains a Death Master File to track deceased individuals to ensure Social Security benefits no longer are issued to those who have died, according to Ryan Guina of Forbes (“IRS Sends Stimulus Checks to Dead Taxpayers. Do They Need to be Repaid?” www.forbes.com, April 17, 2020, updated May 1 and May 6).

However, it appears the IRS did not use this list before issuing tax refunds or did not have the current version of the file.

I assumed I would simply return the money. But I found comments from lawyers, taxpayer- rights advocates, and tax-policy experts questioning whether one has to give the money back and whether the IRS would come after it. I am rethinking my initial position.

Former Taxpayer Advocate (for the IRS) Nina Olson says nothing in the law prohibits payments from going to the deceased nor is there anything in the law requiring people to return the payments. “We are starting from these two sound bites and working backward,” said Olson, now executive director of the nonprofit Center for Taxpayer Rights (“Feds want stimulus money sent to the dead to be returned,” Sarah Skidmore Sell, Associated Press, Star Tribune, May 10, 2020).

Olson told AARP that the IRS position was different in 2008, when the government distributed stimulus payments during the Great Recession. Some dead people also received checks, but the IRS didn’t make an effort to get the money returned, she said (“My Dead Relative Received a Stimulus Check. Can We Keep It?” by John Waggoner, https://www.aarp.org, May 6, 2020)

The IRS guidance of May 6, 2020, puzzles Olson. “What is the legal reasoning for this and why is this position different from the IRS’s position in 2008?” Olson asked. “The government is entitled to change its mind, but without explaining its rationale, this position appears arbitrary and capricious.”

Some law experts say that the CARES Act has no “clawback” provision for checks sent to deceased people; thus, the IRS can’t take back the money after it has been disbursed.

Twin Cities lawyer Marshall Tanick told Fox 9 News that nothing in the law prohibits an heir, beneficiary, or family member from receiving and accepting money for a decedent. Referring to the case of a deceased woman, Tanick said, “I don’t think it’s anybody else’s money. This woman is entitled to it. She deserved it. She’s a taxpayer, and the way the law is structured, it’s for people who’ve paid taxes . . . and if they’re no longer alive, their heirs should be the rightful recipients of that kind of money.” (“Twin Cities man hopes to give deceased mother’s stimulus check to charity,” by Paul Blume, Fox 9 News, May 5, 2020).

No one really knows what the IRS will do come tax time next year—but the answer may be nothing, according to Garett Watson, senior policy analyst at the nonprofit Tax Foundation.

“I suspect the IRS will encourage people to return payments given incorrectly, but it’s less likely the agency will pursue people legally or through the 2021 tax season,” Watson said. “It’s important to note that the IRS FAQs are not considered legal documents or even formal guidance, so while they are helpful in establishing the agency’s position, we’d need more details before knowing whether they’d have a strong case to pursue individuals legally over the payments.”

Trump has drawn criticism because his signature was added to paper checks sent to taxpayers  who did not receive their checks through direct deposit. Treasury Secretary Mnuchin said it was his idea to include Trump’s name on the checks, and he denied reports that adding the president’s name delayed delivery of some checks. Senate Minority Leader Chuck Schumer said Trump “unfortunately appears to see the pandemic as just another opportunity to promote his own political interests.”

Like the Trump signature on checks, the Trump letter, written on White House stationery, has raised objections.

“Our great country is experiencing an unprecedented public health and economic challenge as a result of the global coronavirus pandemic,” the letter says. “Our top priority is your health and safety. As we wage total war on this invisible enemy, we are also working around the clock to protect hardworking Americans like you from the consequences of the economic shutdown. We are fully committed to ensuring that you and your family have the support you need to get through this.”

Olson of the Center for Taxpayer Rights, called the letter “unbelievable” and said it makes the agency “look like it is the handmaiden of one administration and one party” (“ ‘My Fellow American’: Donald Trump letter to stimulus check recipients raises objections,” by Michael Collins,  USA TODAY, May 4, 2020).

I asked one of my three daughters if she had received the letter. “Yeah,” she replied. “We did a household burning. It was both symbolic and cathartic.” A second daughter tore up the letter while uttering an unprintable epithet.

The law that provided for the stimulus payments requires that a written notice be sent via mail to the last known address of any taxpayer who received one of the stimulus checks. The law says the letter must be sent no later than 15 days after the money has been distributed and must include the payment method, the amount of the payment, and an IRS phone number to report any failure to receive such a payment.

The law doesn’t dictate who should send the letter, Collins notes. Trump said the letter was needed to fulfill the requirements of the law and to let “each American know that we are getting through this challenge together as one American family. And that’s what’s happening.”

Olson said Trump’s letter is the first time she can recall the president sending a letter directly to taxpayers through the IRS. “The IRS is supposed to be an apolitical administrator of the law that Congress writes and passes and the president signs, period,” she said.

Besides further damaging the credibility of the IRS, Trump’s name sows further confusion because it arrives in an envelope from the Treasury Department and the IRS, Olson said. The envelope notes that postage and fees were paid by the IRS.

“Just think of the optics of someone receiving a letter that comes in an IRS envelope, and the first thing they see is the letterhead of the president of the United States,” Olson told Collins. “That immediately puts into people’s minds that the IRS is doing the will of the president of the United States and promoting the president of the United States rather than serving as an impartial broker and administrator of the revenue code. That will damage the IRS’s reputation, and it will damage the tax system. I don’t care who the president of the United States is. It doesn’t matter.”

Even if it may be legal to keep the check, it may not be ethical.

At least one ethics expert thinks returning checks sent to the dead is the right thing to do even if not mandated by the CARES Act. “Most, if not all, of those people who received a check intended for a dead relative know it was in error,” says Jeffrey Seglin, senior lecturer in public policy at Harvard University and author of The Right Thing, a weekly ethics column. “The stimulus money was not intended to go to dead people. Ethically, the right thing would be to not cash the check (AARP, May 6).”

Ethics refers to conventional standards of right and wrong that prescribe what people should do. These standards usually consist of rights, obligations, and benefits to society. They also include virtues such as fairness, honesty, loyalty, and concern for others. Further, ethics is about having values and taking responsibility (Mary Ellen Guffey & Dana Loewy, Business Communication: Process and Product,  8^th edition, Cengage Learning, 2015).

Authors Guffey and Loewy, focusing on the business context, suggest five questions to guide ethical decisions: is the action legal? Would you do it if you were on the opposite side? Can you rule out a better alternative? Would a trusted advisor agree? Would family, friends, employer, or coworkers approve?

Keeping the checks seems legal. If I were the Treasury Department, I would not waste resources to recoup erroneously-issued checks. A better alternative might be to cash the check and donate  the proceeds to a charity focusing on COVID-19. My lawyer says “it’s my call.” My accountant says “my mother paid enough in taxes to deserve a refund!” My family and friends likely would support my keeping the check.

Then, of course, the Trump issue colors one’s perspective. He has made everything about the coronavirus about him—little recognition or empathy for the infected and the 100,000 Americans deceased. Trump was slow to acknowledge the presence and impact of the virus. He has failed to provide coordinated, national leadership. His focus is on blaming others.

What would you do?