IRS Holding EIP payments

Forum|Forum|5 years ago
March 29, 2021
7 replies
40 views

The taxpayer's spouse died in December, 2019. He received both $1,200 payments in April 2020. He understands he needs to return the $1,200 to the IRS for his spouse but as of March, 2021 he has not yet returned the overpayment.

Taxpayer did not receive EIP 2 for $600. I believe he can recover that via the Recovery Rebate credit worksheet when preparing his 2020 tax return.

Taxpayer is convinced he did not get EIP 2 because he received the overpayment for his wife who passed and the IRS will not give him EIP 2, or the 2021 EIP, until he returns the EIP #1 $1,200.

Taxpayer has also not received EIP #3 to date.

I don't believe the IRS is holding EIP payments for a situation like this. Has anyone had experience or seen guidance that the IRS is holding EIP payments in situations like this?

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qbteachmt

Level 15

The taxpayer is confused.

Perhaps it would help to review what is really happening for EIP “stimulus” funds: The funds were paid out as Advanced payment against a projection. The first two payouts were projected based on 2018 or 2019 tax returns, but the eligibility is part of tax year 2020 as Actuals. You use the 2020 return to reconcile what a person is entitled to, against what they got.

If the person is not a dependent in 2020, then they would be eligible for consideration as individual filers. That doesn't mean "not being claimed." It means "no longer qualifies as a dependent." You must correctly address whether they Can be Claimed as a dependent on someone else’s tax return.

The third payout which started in Jan 2021, has different eligibility rules as to dependents and this payout is a projection, using 2019 or 2020 tax returns, then reconciled against Actuals on the 2021 tax return.

You might want to bookmark these links and read the IRS guidance.

Interactive wizards portal includes one for determining dependency:

https://www.irs.gov/help/ita

And:

https://www.irs.gov/newsroom/economic-impact-payment-information-center-topic-a-eip-eligibility

https://www.irs.gov/coronavirus/second-eip-faqs#Eligibility

https://www.irs.gov/newsroom/irs-is-issuing-third-round-of-economic-impact-payments

One for each of the three EIP “stimulus” payments.

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K

kirkaveryAuthor

Level 3

Thanks for your response. I think I understand the rules around EIP payments. The question is whether the IRS would hold future EIP payments if the first EIP overpayment was not returned. I have not found anything in the all the literature that addresses this question.

qbteachmt

Level 15

We would assume the first EIP was paid out before the 2019 tax filing got processed in 2020, showing the date of death for the spouse was in 2019. And it is possible the second payout didn't happen at all, taking the first payout into consideration.

He hasn't returned that check, which is what the IRS announced should be done back then, for people not alive in 2020.

The IRS has info for when an EIP might be "garnished" and I have never seen that one; the wording is different for each EIP.

Have you filled in the 1040 showing that for 2020, he got more than he is entitled to? The 2020 tax form is supposed to be the reconciliation.

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