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A Whopping $1.4 Billion in Stimulus Cash Was Sent to Deceased Americans

By Maurie Backman – Jun 27, 2020 at 9:04AM

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Talk about a costly blunder.

When the COVID-19 crisis hit hard, lawmakers immediately put their heads together to assemble a relief package. In late March, the CARES Act was passed, and one of its most talked-about provisions was a one-time stimulus payment worth up to $1,200 for qualifying recipients.

While those initial stimulus checks served as a lifeline for out-of-work and income-insecure Americans alike, many people blew through that cash quickly upon receipt in April or May. Now, several months later, Americans are desperate for a second round of relief, and some lawmakers are fighting to make that happen. There are several barriers to a follow-up stimulus check, though, and money is definitely one of them.

Loose pile of hundred-dollar bills

Image source: Getty Images.

In May, Democrats introduced the HEROES Act, a $3 trillion relief package that calls for a follow-up round of stimulus payments. But Republicans have criticized the HEROES Act from the start, citing its cost as a major deal-breaker.

In light of this, it's a shame to learn that the IRS spent $1.4 billion earlier this year on stimulus payments that were sent out to people who actually were not alive at the time. A new report from the Government Accountability Office has found that roughly 1.1 million payments were sent out erroneously, costing the government $1.4 billion -- money that could instead be used to provide relief to struggling Americans today.

What went wrong?

How did so many stimulus payments manage to go out to people who aren't even alive? It's actually pretty simple: Eligibility for a stimulus payment was based on data from 2018 or 2019 tax returns -- the most recent return the IRS had on file. But because the goal was to get that money into Americans' hands as quickly as possible, the agency didn't take the time to vet each individual recipient. Instead, payments were blasted out either by check, direct deposit, or debit card without verifying whether those on the receiving end were alive and well (or at least alive).

So what happens now? Both Treasury Secretary Steve Mnuchin and the IRS have stated that stimulus payments issued to deceased individuals must be returned. But for that to happen, the IRS also needs to reach out to recipients who may be in possession of a deceased family member's stimulus money and make it clear that it needs to be given back.

The only partial exception is if someone whose spouse passed away receives a check meant to cover two people. In that case, the surviving spouse can keep half of that stimulus payment, but must return the remaining portion.

Will this happen again?

Despite the fact that the HEROES Act is unlikely to pass the Senate, President Trump has stated that he expects a second relief package to go through that may or may not include a follow-up round of direct stimulus payments. So what's to prevent the IRS from paying deceased people again?

One solution is to have the Social Security Administration share more data with the Treasury Department so that death records can be updated, thereby preventing this costly mistake in the future. At a time when so many Americans need help getting through the current recession, the government can't afford to part with over $1 billion due to what's technically a clerical error.

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