Economic Impact Payment - How to Handle?

[FOCUSGuy]

My daughter received an Economic Impact Payment of $1,200. 

I claimed her as my dependent in 2019 and all previous years. 

On her 2018 and 2019 returns, her first two returns as a high school kid with an after school job, we checked 'someone can claim you as a dependent'. 

So, any ideas on how to handle this check? 

The IRS site doesn't seem to have any information on how to return a check. 

Maybe the 2020 returns will have a way to return the funds? 

[TaxGuyBill]

https://www.irs.gov/taxtopics/tc161

[Bsch4477]

There is no “claw back” provision attached to the stimulus so you can keep it.

https://www.irs.gov/coronavirus/economic-impact-payment-information-center#calculating

[TaxGuyBill]

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@Bsch4477 wrote:

There is no “claw back” provision attached to the stimulus so you can keep it.

https://www.irs.gov/coronavirus/economic-impact-payment-information-center#calculating

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I don't think no-clawback provision applies if the payment shouldn't have been made in the first place.

Whether or not the IRS pursues these situations is unknown, except that the Treasury has unofficially said they want the payments to dead people back.

[IRonMaN]

Who cares whether or not there are or are not clawback provisions?  What ever happened to people just doing the right thing.  Whether it's dead people getting checks, foreigners getting checks or dependents getting checks, if you really weren't entitled to the payment can't folks just do the right thing and send it back?  

[FOCUSGuy]

🙂  I do want to return the funds. 

Just not sure exactly how to do it. 

Meaning exactly who or what entity do I use on the envelop when I return the check?

I'd rather follow an accepted/defined process at this point.   

[FOCUSGuy]

Thank you for sending the link to tax Topic 161. 

I see it applies to 'Tax Refunds'; for sure this isn't a refund but the 'Economic Impact Payment'. 

I'll wait a bit, and if I have no other alternative, I will go ahead an return the check using the instructions in this Topic. 

Once again, many thanks. 

[Bsch4477]

For what it’s worth, the information below is exempted from a MarketWatch article  

Q: I believe that my adult son received a $1,200 EIP, via automatic deposit to his checking account, that he was not entitled to because he is my tax-return dependent. Will the IRS go into his checking account and debit it to get the money back?

A: No. The statutory language in the CARES Act that set the whole EIP scheme in motion says that anybody who gets more money than they are actually entitled to can keep the excess. I endorse that concept: any money that gets into people’s hands is fair game.

[IRonMaN]

FOCUSGuy - thanks for trying to do what is right.  Maybe my folks brought me up wrong, but I'm not a big believer in keeping things that don't rightfully belong to me.  Instead of returning the check, you could always just frame it and put it up on your wall for a souvenir.  

[qbteachmt]

I expect the 2020 returns to have a reconciliation section for these payments, as an advance on tax credits.

[FOCUSGuy]

Yep, a true up on the 2020 returns would make sense. 

And be the easiest for both the IRS and taxpayers. 

Thanks. 

[IRonMaN]

But the true up is going to involve providing a credit for those entitled that didn't receive a payment.  I don't know if it is necessarily going to cover adding a liability for a payment that you weren't entitled to.

[FOCUSGuy]

The IRS published 'COVID Tax Tip 2020-73 - Returning an Economic Impact Payment on 18-June-2020:

https://www.irs.gov/newsroom/returning-an-economic-impact-payment

So, I'm all set on this, and now know exactly what to do. 

Thanks again all.