TaxWatch: If your dead relative received a stimulus check, you should return it to the feds, Mnuchin says

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Stimulus checks issued to dead people need to be returned to the federal government, according to Treasury Secretary Steven Mnuchin.

The Internal Revenue Service has already sent out nearly 90 million checks in a matter of weeks and one of the emerging issues is that some of the recipients are deceased.

This is happening because the IRS is sending out checks to people who filed taxes in 2018 or 2019. The problem is, some of the people on those tax returns have since died.

If surviving relatives who received a check for a dead loved one were wondering what to do, Mnuchin offered an answer Tuesday.

“You’re not supposed to keep that payment,” Mnuchin told the Wall Street Journal. “We’re checking the databases, but there could be a scenario where we missed something, and yes, the heirs should be returning that money.”

The Treasury Department and IRS did not immediately respond to a request for comment from MarketWatch on how relatives should return the money, and what the consequences could be for people who do not return checks.

Tax experts previously told MarketWatch that their interpretation of the CARES Act — the $2.2 trillion bill that created the stimulus payments — was that relatives didn’t have to return the money. Now they’re waiting to see whether the IRS will issue guidelines on how to handle checks sent to deceased people.

Adam Markowitz, a Leesburg, Fla.-based tax preparer, had two clients who received stimulus checks for dead relatives. In one instance, a surviving husband got a paper check for himself and one for his dead wife. A notation on the check for the wife said “deceased,” Markowitz said.

“And yes, the check did clear,” he added.

In Markowitz’s and other tax experts’ reading of the legislation, the CARES Act did not include a provision allowing the IRS to take back stimulus payments mistakenly sent to dead people, also known as a “clawback” provision.

“It’s going to take an act of the IRS to put in a clawback method,” Markowitz told MarketWatch.

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The stimulus checks — $1,200 to individuals making less than $75,000 and $2,400 to married couples making under $150,000 — are part of the $2.2 trillion stimulus bill passed last month to inject cash into an economy faltering under the coronavirus outbreak.

The top priority of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was getting cash out quickly even if it meant sacrificing some accuracy, according to Nicole Kaeding, an economist and vice president of policy promotion at the National Taxpayers Union Foundation, a right-leaning tax think tank.

On Wednesday, Kaeding told MarketWatch that Mnuchin’s comments “surprised me a bit, given that the CARES Act included language that covers clerical mistakes by the IRS.”

Kaeding previously told 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. And that’s important because they were trying to issue these checks quickly.”

She’s waiting to read any guidance that the IRS issues on the matter. “The question will be, ‘Do they enforce it?’” Kaeding said. She’s also curious to see whether the IRS will try to assess penalties if relatives don’t return the money.