IRS Issues Instructions on How to Handle Payments Made to Deceased Individuals
On May 6, 2020 the Internal Revenue Service (IRS) updated its Economic Impact Payment Information Center to include new questions and answers related to Economic Impact Payments (EIP) issued to deceased individuals.
IRS Question 10 asks whether someone who has died qualifies for an EIP. The answer states the following:
“No. A Payment made to someone who died before receipt of the Payment should be returned to the IRS by following the instructions in the Q&A about repayments. Return the entire Payment unless the Payment was made to joint filers and one spouse had not died before receipt of the Payment, in which case, you only need to return the portion of the Payment made on account of the decedent. This amount will be $1,200 unless adjusted gross income exceeded $150,000.”
The instructions for returning an EIP provide the following:
- If the payment was a paper check:
- Write "Void" in the endorsement section on the back of the check.
- Mail the voided Treasury check immediately to the appropriate IRS location.
- Don't staple, bend, or paper clip the check.
- Include a note stating the reason for returning the check.
- If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:
- Submit a personal check, money order, etc., immediately to the appropriate IRS location.
- Write on the check/money order made payable to “U.S. Treasury” and write 2020EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.
- Include a brief explanation of the reason for returning the EIP.
The IRS has provided a list of appropriate addresses on its website which can be found in the link at the end of this article.
Considerations for Banks
The information provided by IRS answers the question as to how EIPs made to decedent should be handled, making it clear that they are to be returned. This is true for EIPs made both by check and direct deposit. An individual who receives an EIP payable to a decedent, or who is in possession of EIP funds paid to a decedent, must return those funds.
Unfortunately, because this information was not issued until after many payments had already been made, it means that some banks have likely already accepted payments made to a decedent. While the information provided by the IRS instructs the recipient to return the EIP funds, banks should consider how they use this information. Certainly, if a customer receives a direct deposit on behalf of a decedent, or presents a check payable to a decedent, that customer should be directed to the instructions for returning the payment. For customers who have already received the funds, either by direct deposit or by depositing a check, those funds still need to be returned pursuant to the instructions.
The IRS instructions also provide how the recipient is to determine the amount that must be returned. Banks are reminded that the appropriate amount that is to be returned is a consideration that should be made by the customer, not the bank. The instructions relate to the recipient and furthermore, banks are not in a position to know the customers adjusted gross income to make the determination on a customer’s behalf.
Conclusion
IRS has made it clear that decedents are not eligible for EIP funds, and individuals who have received payments made to decedents are to return those funds. At this time, IRS has not indicated any steps beyond the requirements above. For example, there is no current indication of a reclamation process beyond a requirement for recipients to return the payments themselves.
By, Amber Seitz
