GAO Reports Stimulus Payments to Dead People Total $1.4 Billion

By:
Chris Gaetano
Published Date:
Jun 25, 2020
The Government Accountability Office (GAO) said that the stimulus payments accidentally sent to dead people numbered 1.1 million, which amounts to $1.4 billion sent out to those who cannot possibly spend it. While reports of payments going to dead people were known, this is the first time the government has reported the scope and scale of these errors.

The GAO report said that, typically, the IRS cross-references third-party data in its programs, such as death records maintained by the Social Security Administration, to detect and prevent fraudulent refund claims. In the case of this program, however, "Treasury and IRS did not use the death records to stop payments to deceased individuals for the first three batches of payments."

The GAO said that this was due, at least partially, to the "legal interpretation under which the IRS was operating." While an IRS working group in charge of administering the payments had raised concerns about checks sent to dead people as early as March, IRS counsel had determined that the agency did not have the legal authority to deny payments to those who filed a 2018 or 2019 tax return, even if they were deceased at the time of payment. On the basis of this determination, the IRS did not exclude decedents in their programming requirements.

The failure to exclude decedents was also due to the fact that the IRS largely followed the 2008 stimulus playbook in distributing the funds. A previous 2013 GAO report pointed out that, then as now, payments were accidentally sent to a number of dead people. In response, the IRS instituted new controls to prevent this from happening in the future. But because the CARES Act provided that people should get their payments as soon as possible, the IRS decided to bypass those controls, which had been in place for seven years.

The report also shows a lack of communication and coordination between IRS and the Treasury Department as a whole, as Treasury officials were apparently unaware of the risk that payments might go to dead people. Once they learned what was happening, the IRS changed course, and is now operating under the argument that "a person is not entitled to receive a payment if he or she is deceased as of the date the payment is to be paid," as such payments are potentially improper payments under the Payment Integrity Information Act of 2019, and so it removed such payments starting with the fourth payment batch.

This change also led to the announcement from Treasury that payments accidentally sent to dead people should be returned to the government. However, the GAO noted that the IRS currently has no plan in place to notify ineligible recipients on how to do so. It recommended that the IRS explore "cost-effective options for notifying ineligible recipients on how to return payments." It also noted how the incident stands as a stark example of the importance of safeguards and following proper procedure.

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