• The U.S. Government Accountability Office said in its report the Internal Revenue Service rushed to get stimulus checks out, skipping protocols for screening payments to the deceased
  • The Treasury Department and IRS said any checks sent to the deceased must be returned, but surviving spouses were allowed to keep half 
  • Congressional Democrats and Republicans are debating a second round of stimulus checks, with Republicans favoring a back-to-work bonus instead of direct payments to taxpayers

As the coronavirus pandemic picked up speed globally, countries were forced to implement some form of stimulus to help keep both their economies afloat and assist millions of people furloughed or fired due to lockdowns. The story was much the same in the U.S. The CARES Act adopted at the end of March provided stimulus checks to assist those struggling during the pandemic, with about $270 billion in checks mailed out or deposited directly in bank accounts. Single Americans received around $1,200 and couples received $2,400, along with an additional $500 for every child less than 17 years of age.

While it was a welcome aid for most, the process wasn’t without faults. More than a million checks were sent to “ineligible Americans.” These “ineligible Americans” were, in truth, deceased. They received around $1.4 billion.

It begs the question: How did so many dead people receive so much money?

The answer, surprisingly, is fairly simple. A report from the U.S. Government Accountability Office found the Internal Revenue Service rushed to get the checks out and did not use available death records to put together its distribution list.

The IRS was said to be in a hectic state in the early stages of the pandemic. When the CARES Act was passed and signed, the IRS had to work fast. And while it had already received some 2019 tax forms, many more Americans still had not filed their taxes by the time the checks would be sent out. This forced the IRS to also rely on 2018 tax forms, which included many Americans who had since died.

Protocols involving Social Security Administration’s death records have been in place since 2013 to keep the IRS from sending tax returns and payments to anyone who dies, but apparently, the protocols were not followed. GAO also found the IRS did not properly alert the U.S. Treasury, which provided the funds for the checks, that a step had been skipped.

When the Treasury Department learned what had happened, it stepped in and said the deceased were not eligible to receive the stimulus checks. The situation ramped up further when a bipartisan group of U.S. congressmen sent a letter to Treasury Secretary Steve Mnuchin, IRS Commissioner Charles Rettig and Social Security Administration Commissioner Andrew Saul.

The letter said:

“We write to raise questions and express concerns with reports that deceased individuals are receiving COVID-19 related economic impact payments. In addition, we write to encourage your departments to take immediate action to prevent these improper CARES Act payments. While it is essential that our constituents receive stimulus payments quickly, these improper payments to deceased individuals represent significant government waste and a burden to constituents who mistakenly accept the payments.”

Mnuchin and Rettig, in response, said any payments issued to the deceased need to be returned as soon as possible. Some leniency was shown to surviving spouses, who were allowed to keep half of the payment.

Instructions on how to return the check, whether it was sent by mail or direct deposit, were provided on the IRS’ website. However, GAO’s said the IRS did not have a plan in place to recoup the funds.

The same mistake was made with incarcerated Americans though the scale was smaller. GAO said around 74,000 checks were sent to prisoners.

This confusion forces one to ask: Could this happen with a second round of checks?

At this point, it depends on the route the White House and Congress take.

Democrats in the House and Senate have been pushing a second round of stimulus checks as part of what is titled the HEROES Act. Much like the CARES Act, a one-time payment of $1,200 and $2,400 would be sent to individuals and couples, respectively, based on their annual income. However, instead of the additional $500 per child, an additional $1,200 would be provided for dependents, regardless of age, capped at three dependents -- $3,600.

The HEROES Act would also increase the pool of people eligible to receive the money, most notably, immigrants with taxpayer identification numbers.

While the HEROES Act passed in the Democrat-controlled House in May, it has since languished in the Republican-controlled Senate.

Republicans’ counterproposal is a back-to-work bonus to incentivize getting the country back up and running. Sen. Rob Portman, R-Ohio, proposed giving anyone going off unemployment rolls an additional $450 a week through July 31. Sen. Kevin Brady, R-Texas, proposed sticking with the current $600 bonus provided every two weeks through unemployment systems under the CARES Act through July 31.

Neither proposal has been taken up with Senate Majority Leader Mitch McConnell saying he's in no hurry to pass another round of stimulus.

The Trump administration was originally believed to favor the back-to-work bonuses. However, the recent surge of coronavirus cases in the U.S. South and West appears to have forced a rethinking. The Wall Street Journal said Trump was “open” to the idea of another round of stimulus checks.

The Paycheck Protection Flexibility Act offers new options for using PPP loans.
The Paycheck Protection Flexibility Act offers new options for using PPP loans. Jernej Furman/Flickr