On Tuesday, May 5, 2020 at 3:25:22 PM UTC-4, Elle Honda.Lioness wrote:
> Based on what happened around 2010, it seems conceivable that the IRS will "ask" for the stimulus payments (made out to decedents/estates) to be returned; provide the procedure for accomplishing this; but also be completely vague about whether a return of the stimulus payment is legally required. For example:
> ====Start Excerpt from Marketwatch.com article=====
> This isn’t the first time the federal government has issued stimulus checks to the dead. More than 71,500 dead Social Security recipients received $250 stimulus payments under the American Recovery and Reinvestment Act, according to a 2010 report from the Social Security Administration’s Inspector General. Deceased Social Security recipients got $18 million of the $13 billion set aside for all Social Security recipients in that Obama-era stimulus package, the report said.
> About half of those checks were returned, the Inspector General report estimated, when reviewing a sample of 50 beneficiaries.
> “People may have returned it, but they didn’t need to,” said Nina Olson, the former head of the Taxpayer Advocate Service, an internal IRS watchdog. The same goes for the $1,200 stimulus payments, as far as Olson sees it. The CARES Act stimulus bill contained no “clawback” provisions for stimulus checks sent to a dead person, meaning the agency can’t retrieve the money after it’s been handed out, she said. “Congress didn’t write around that this year,” she said.
> =====End Excerpt=========
> To me this may leave some personal representatives in a quandary: Does the personal representative (PR) have a duty to the estate to distribute the stimulus check to the beneficiaries? Or should the estate and the PR be "shamed" into returning money from the U. S. Treasury that, if push comes to shove, legally belongs to the estate?
> If either 364 days go by without clarification here, or this coming clarification does not sound like it has the law behind it, I will likely send the $1200 to the charity that is the estate's beneficiary and not think twice about it. It's my "Whatever" response, in the belief that the IRS is unlikely to come after me.
> Give it a few more months, and as food shortages start, this may be the least of one's worries.
Here is a detailed analysis of why EIP payments to decedents do not need to be returned to the IRS, notwithstanding IRS FAQs to the contrary. The analysis was written by David M. Fogel, EA, CPA, USTCP. (For those who don't recognize the last acronym, it stands for Unites States Tax Court Practitioner. It means that David is a non-attorney who has been granted authority to represent clients in cases before the US Tax Court). He writes:
I'll provide my analysis, which is in several threads on the WebBoard. The simple situation is a single individual who died on July 1, 2018. His final Form 1040 for the period January 1, 2018 to July 1, 2018 was filed timely.
Under IRC 6428(f)(1), the advance stimulus payment is based first on the 2019 return. This section states:
(f) ADVANCE REFUNDS AND CREDITS.---
(1) IN GENERAL.---Subject to paragraph (5), each individual who was an eligible individual for such individual's first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.
So, this section states that an individual who was an "eligible individual" for the individual's year beginning in 2019 shall be entitled to the advance stimulus payment. The individual in our example fails this test because he died in 2018.
Under IRC 6428(f)(5), if no 2019 return has been filed, then the advance stimulus payment is based on the 2018 return. This section states:
(5) ALTERNATE TAXABLE YEAR.---In the case of an individual who, at the time of any determination made pursuant to paragraph (3), has not filed a tax return for the year described in paragraph (1), the Secretary may---
(A) apply such paragraph by substituting "2018" for "2019", and * * *
So, this section states that if the individual has not filed a 2019 return, then the IRS may substitute "2018" for "2019" in IRC 6428(f)(1). As a result, an individual who was an "eligible individual" for the individual's year beginning in 2018 shall be entitled to the advance stimulus payment. The individual in our example satisfies this test because he was alive beginning in 2018, and therefore, he is entitled to a $1,200 advance stimulus payment.
IRC 6428(e)(1) provides that the $1,200 advance stimulus payment doesn't have to be paid back. This section states:
(e) COORDINATION WITH ADVANCE REFUNDS OF CREDIT.---
(1) IN GENERAL.---The amount of credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (f). Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).
Under IRC 6428(d)(3), an estate is not an "eligible individual." The amount of the credit for 2020 is zero because the individual died in 2018. Under IRC 6428(e)(1), the zero credit is reduced by the $1,200 advance stimulus payment, resulting in a number that is below zero. As a result, the advance stimulus payment doesn't have to be paid back due to the "(but not below zero)" language.
Some might point to the word "may" in IRC 6428(f)(5) (above) and say that the IRS doesn't have to substitute "2018" for "2019," and this gives the IRS the right to demand that the advance stimulus payment be paid back. But if the $1,200 payment has already been made to an individual who died in 2018, then the IRS has already used its discretionary power, has chosen 2018 as the alternate taxable year upon which to base the advance stimulus payment, and therefore may not demand repayment.
Unless and until Congress changes the law, checks issued under this statute to an eligible individual who died during 2018 are proper. The same applies to an eligible individual who died during 2019, or who died during 2020 but before the IRS made the determination to issue an advance stimulus payment.
--- end of David M. Fogel's analysis ---
Ira Smilovitz, EA