IRS withholding refunds toward stimulus payback

[dd4vols]

 So..  big brother has caught up to the funeral home. A client of mine, whose husband died in 2019... was due a $7900 refund. And the 'Where's my Refund" app initially said the refund was in process, etc..   Well, she still has not gotten the refund, and I went on the 'Where's my Refund' for her yesterday.. and her refund is being held for a past due obligation ..blah blah listed the usual suspects, child support, student loan, etc. Of which she said there were none to her knowledge, and they consistently got a refund in prior years.

So I had her call the number listed... Bureau of Fiscal Reserve..... and ta da...they are applying $1,200 of her refund as a recapture of the stimulus check she got for her  deceased husband.  So, I'm guessing the initial thoughts that 'if you got too much, you would not have to pay it back', appear incorrect. Be a rude awakening on lots of people's 2020 Form 1040 I suspect.

[Just-Lisa-Now-]

Thanks for the info!

[Just-Lisa-Now-]

Is there a way to Query for all deceased clients?  I havent gone digging yet....ok, it is a Query but HOLY COW! those queries take FOREVER and tie up the entire computer, I cant even open a browser window while its running...guess I'll start the query today when I leave the office.

[The-Tax-Lady]

So instead of having to repay the 1200 issued to the deceased spouse herself, the IRS offset the incorrect payment from the refund which simply zeros out the mistake and saves your client the inconvenience of sending the money back thru some other method. Sounds good to me. 

Anyone who believes the $$ paid to deceased individuals, approx. 76,000, would be OK, and did not advise their client to anticipate a requirement  to repay the money is, in my opinion, not providing the client with a realistic outlook.

I told my clients who received the direct deposit of EIP $$ for deceased spouses, to leave it in the account, don't spend it, until the IRS decides what to do and how to get it back, because I always believed it would have to be repaid.

Guidance was released last week on repayment requirements and methods. It's raining $$$ out there, lots of mistakes are being made by the IRS and 2020 returns will be a mess. A little common sense advice to clients will ease some of the coming chaos.

[IRonMaN]

"I havent gone digging yet"

Lisa - put that shovel away and let those poor dead folks rest in peace.  😮

[dkh]

I've read numerous articles regarding the payments issued for deceased taxpayers.  They all say something different - won't need to pay;  will need to pay back....blah blah blah.   My own mother is in this predicament.  My father was alive when 2018 return was filed.  2019 return not yet filed.  She received $2400 EIP.   Will IRS be holding out their hand for $1200 once the 2019 is filed.     And are they going to require a pay back for a dependent that was on 2018 or 2019,whichever return was used for the EIP check, that will not be on the 2020 return ???     What a *$#%ing mess.

[BobKamman]

Of course, there is no such place as the "Bureau of Fiscal Reserve".

[The-Tax-Lady]

It's not so easy, reinventing the wheel, and having it roll out smoothly, in 2 weeks.

The only statements that matter are the ones the IRS put out as Guidance, the rest are wishful thinking or somebody's best guess based on somebody else's best guess.

I don't know about "holding their hand out" as a accurate description of recovering payments made to an individual who was not entitled to the payment.

I my experience, most people receiving excess EIP $$ know they are being paid too much and are asking how to pay it back or quietly hoping the IRS doesn't notice. Based on an the post, obviously they will offset 2019 refunds to recover the EIP and it is our obligation to make sure clients understand that possibility. It's a better option than reversing the direct deposit and recovering the EIP from individuals who already spent the $$, which would really create a banking nightmare and true hardship on the taxpayer.

Why would they want payback on a dependent for 2018 or 2019 that is not on the 2020 return?Dependent EIP $$ was paid for children 0 -16 years old, so chances are they will still be a dependent in 2020, not that it will matter, in my view.

My concerns, as far as dependents 0-16, are all the baby daddys or mommys, that received the $500 because the court decree gave them the right to claim a dependent child for tax purposes. The actual Custodial parent received nothing and in reality are providing the home and support for the child. That should be a fun fix or court case.

Dependents 17-23 were the real people left out of the EIP plan and provisions are being made on the 2020 tax return to compensate them, if eligible.

It is a mess and will be for sometime to come, but it's the IRS, when has it ever been easy or agreeable.

[BobKamman]

@The-Tax-Lady 

“The only statements that matter are the ones the IRS put out as Guidance”

The only statements that matter are the ones that IRS publishes in the Internal Revenue Bulletin. Those do not include the ephemeral FAQ’s that someone has been composing at home in their pajamas.

“Dependents 17-23 were the real people left out of the EIP plan and provisions are being made on the 2020 tax return to compensate them, if eligible.”

I have no idea what you mean. The only plan I know of is the House bill, which the Senator from Kentucky says is “dead on arrival,” that would change “qualifying child” to “dependent” – I think, both for the first round of EIP’s and the proposed second round. Now that’s what I call wishful thinking, although in politics all things are possible.

[The-Tax-Lady]

I agree Bob, I should have said, IRS Guidance is the best "could or should be happening" news source.

I'm not following the rest of the mess too carefully, since it is so subject to change, but I thought there was some talk of trying to make everything right via the 2020 Return if necessary.

No idea what "everything" will be comprised of, but I believe there are many 18-23 yr old taxpayers who should be eligible for the EIP. They received zero and the person claiming them received an extra zero, so when the world gets back out there, I expect some equitable solution will be arrived at and become part of the 2020 return. I was responding to the dependent reference by dkh with what I believe will happen, apologies if I made it sound like there was already a line on the 2020 1040.

I'm an optimist and it is a long time till 2021, with a national election looming, so who knows what the future holds.

[dkh]

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@The-Tax-Lady wrote:

I don't know about "holding their hand out" as a accurate description of recovering payments made to an individual who was not entitled to the payment.

Why would they want payback on a dependent for 2018 or 2019 that is not on the 2020 return?Dependent EIP $$ was paid for children 0 -16 years old, so chances are they will still be a dependent in 2020, not that it will matter, in my view.

IRS cannot possibly recover all the money sent to those who you deem are "not entitled"  For instance - a married couple that was required to file a 2018 return, one dies in 2019 after 2018 return was filed.  The deceased person was earning a small W2 wage (no federal tax w/held).  The surviving spouse only has SocSec income.  Their 2019 total income is below the filing threshold so no return will be filed.  IRS sent EIP based on 2018 - $2400.    How does IRS know to ask for the $1200 back?     Don't say the preparer should advise them to return it because not all returns are done by paid preparers.  

 I have clients who cannot be claimed as dependents by their parents at the age of 18 because they are earning $75k-$100k in our local industries.  I have clients that received EIP based on the 2018 return which had  a 16yr dependent whom will not be on the 2020 tax return. So while you may not have this in the taxes you prepare don't be so quick to assume no one else does.   Is IRS going to recover the $500?  They weren't entitled.   Only fair if the widow has to return the $1200.

[dd4vols]

Bureau of the Fiscal Service..(BFS)happy fingers in original post