Huge stimulus check error costs big-time

July 13 update

Last month, we found out that over 1 million stimulus payments were sent out to deceased individuals — an amount that totaled to nearly $1.4 billion.

The IRS published guidelines for what people can do if they received funds addressed to deceased individuals.

But now, the IRS has gone a step further and is canceling the stimulus checks that were sent out to people no longer alive.

“The cancellation of uncashed checks is part of this process,” the IRS said. “BFS has cancelled outstanding Economic Impact Payment (EIP) checks issued to recipients who may not be eligible, including those who may be deceased.”

The mistake happened because systems utilized by the IRS were not properly synced with others.

So hopefully if and when a second round of stimulus checks comes, this mistake will not happen again.

Keep in mind that if you receive a check that is addressed to you but the amount is for more than you believe you are eligible for, you are entitled to cash that check since that is considered a clerical error by the IRS.

As reported by MarketWatch, “An important provision of the [Coronavirus Aid, Relief, and Economic Security] act, as it relates to these checks, is that if the IRS sends you too much money, you do not need to pay it back. It is considered a clerical or math error on behalf of the IRS.”

The problem is just when a check is not made out to you or to someone not living.

H/T

June 25 update

We already knew that the the IRS erroneously issued out some stimulus payments to deceased taxpayers.

There was an entire controversy around it were the IRS was reportedly expecting individuals to send those checks back but those individuals were not sure what to do at the time (we now know what to do).

Well, it turns out that the government sent out over 1 million payments to deceased individuals and the total value of these payments was nearly $1.4 billion!

Yikes.

On the one hand, you have to give the federal government credit for issuing out stimulus checks very quickly.

Yes, it is true that not everybody received their checks in a timely fashion and I have seen lots of comments from people who have been left out.

But the majority of eligible Americans received their stimulus checks relatively quickly.

But that efficiency came at the cost of sending out over $1 billion worth of checks to people not living so there was a substantial price to pay.

Hopefully, as the next round of stimulus checks goes out the IRS can avoid costly mistakes like this and more accurately send out funds to people who need them.

As to how this problem happened, it looks like it was an instance of systems not being completely linked.

The Social Security Administration (SSA) maintains a Death Master File which keeps up with deceased taxpayers.

The IRS reportedly has access to this file but the stimulus checks were issued by the Treasury Department and its Bureau of fiscal Service.

Apparently their system was not linked to the SSA’s Death Master File.

If you did erroneously receive funds, the IRS has sent out guidance on what to do.

Via Forbes they state that if you received a check via mail:

• “Simply write “Void” in the endorsement section on the back of the check.
• Mail the voided Treasury check to the appropriate IRS location listed here.
• Don’t staple, bend, or paper clip the check.
• Include a note stating the reason for returning the check.” 

If you received a payment via direct deposit:

• “Submit a personal check, money order, etc., to the appropriate IRS location listed here.
• Write on the check/money order made payable to “U.S. Treasury” and write 2020EIP, and the taxpayer identification number (social security number,  or individual taxpayer identification number) of the recipient of the check.
• Include a brief explanation of the reason for returning the EIP.”

I fully expected that there would be a price to pay for the speed at which the stimulus checks went out.

But the price of almost $1.5 billion is very significant.

It stings to think that those funds could’ve gone to people who really need them or to some other purpose to help the ailing economy.

Hopefully the same mistakes will be made the school around.

Related

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Eligibility for next stimulus check may be capped at $40,000?