The Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) is a federal economic relief package for American workers and families. It provides for payments of up to $1,200 to individuals ($2,400 for married couples) with additional payments of up to $500 for each eligible child. Financial eligibility for these payments is based on gross income reported in 2018 and/or 2019.
We have received calls about what to do with funds sent to people who have passed away. Unfortunately, the Act is a bit unclear on the topic.
The CARES Act does not explicitly provide for a claw back of payments made to deceased people, and it remains uncertain whether the IRS will be releasing regulations on the topic. (There is no indication that payments received before death are subject to return. )
However, on May 6, 2020, the IRS published a Q&A instructing taxpayers who received payments on behalf of a deceased person to return those funds the IRS. (https://www.irs.gov/coronavirus/economic-impact-payment-information-center#more ) While the Q&A instructions are not regulations, following the instructions provided by the IRS will help taxpayers avoid possible penalties.
Section 2201 of the CARES Act provides for payments by inserting a new section, Section 6428, into the Internal Revenue Code. Section 6428 allows for a payment to anyone who has filed a tax return for tax years 2018 or 2019, or who received Forms SSA-1099 or RRB-1099 for tax year 2019, and who meet the relevant income requirements. Those eligible are any individuals other than (i) nonresident aliens; (ii) spouses of joint filers and dependents; and (iii) estates and trusts. According to the IRS interpretation as stated in the above-mentioned Q&A, payments made to anyone who died before receipt of their payments should be returned.
If the payment is made to a deceased person and their surviving joint-filer spouse, the surviving spouse may retain their portion of the payment and return the payment made to the deceased spouse.
The IRS guidance establishes different return procedures for payments made by check and payments made by direct deposit. The IRS instructions for uncashed checks provide that the taxpayer should write “Void” in the endorsement area on the back of the check and mail it to the IRS with a note indicating the reason it is being returned (i.e. that the recipient was deceased before the payment was received). The IRS instructions for payments made by direct deposit, provide that the current accountholder should mail a personal check or money order payable to “U.S. Treasury” from the account where the funds were received. The check or money order should indicate “2020EIP,” and the deceased person’s social security number or ITIN should be written in the memo. The repayment should be mailed together with a letter explaining that the funds are being returned because they were received on behalf of a deceased person. If the payment was made by check and the check was already cashed, the person who received and cashed the check should follow the direct deposit procedure. See below for where to mail the check according to your state of residence.
New York
Brookhaven Refund Inquiry Unit
5000 Corporate Ct.
Mail Stop 5467
Holtsville, NY 11742
Connecticut or New Jersey
Kansas City Refund Inquiry Unit
333 W. Pershing Rd.
Mail Stop 6800, N-2
Kansas City, MO 64108
Taxpayers who need to return funds should do so immediately. As with any payments or correspondence to the IRS, it is advisable that the return payment be documented. Copy and retain all correspondence including the check and the stamped, addressed envelope in which you mailed the check. Before using a traceable mail service (such as FedEx, UPS, or Certified Mail) it is important to first confirm that the particular IRS office is able to accept such shipments and if not to find out if there is an alternate address for such shipments.
You can now track the status of your payment on line at https://www.irs.gov/coronavirus/get-my-payment.
