Right after the CARES Act was enacted, the IRS immediately began a mad scramble to get stimulus checks out to anxious Americans as quickly as possible. But, as you know, haste makes waste. By rushing to set up a system to process the $1,200 payments, some mistakes were made. One of those errors resulted in over 1 million stimulus checks being sent to dead people.
At first, the IRS didn't seem to be all that concerned over this oddity. However, after a while, the tax agency determine that deceased people shouldn't receive a stimulus check payment and asked the surviving spouse to return the payment. If a joint check was received, the living spouse only had to return that portion of the payment allocated to the deceased spouse.
Then the IRS went a step further. It started cancelling uncashed checks sent to deceased people.
Unfortunately, that meant some joint stimulus checks sent to both the living spouse and the deceased one were cancelled, too.
New Checks Will Be Issued
The IRS says its fixing this problem. The tax agency announced that it will reissue payments to surviving spouses of deceased people who were unable to deposit the initial stimulus checks paid to both the deceased and surviving spouse.
For checks that were cancelled or returned, the surviving spouse will automatically receive their share of the payment. The IRS has not said when the reissued payments will arrive, though.
What About Second-Round Stimulus Checks?
While negotiations have broken down, there's still a chance that we'll get a second round of stimulus checks this year. Right now, there are two main stimulus check plans currently under consideration – the HEROES Act proposal (backed by Democrats) and the HEALS Act plan (backed by Republicans). The HEROES Act is silent when it comes to payments to dead people. However, the HEALS Act specifically excludes people who died before January 1, 2020, from the list of eligible recipients.
The HEALS Act would also retroactively declare people who died before 2020 to be ineligible for CARES Act stimulus payments. If that were to happen, then the IRS would still have to reissue checks for a living spouse's share of first-round stimulus money.
Have specific questions? Don't hesitate to reach out to me today
Wes Garner, CRPC
Principal Wealth Strategist
(281) 269-8669
wgarner@tdecu.org
Important Disclosures
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
This article was published by The Kiplinger Washington Editors.
LPL Tracking 01-05048224