Stimulus Check Update: The IRS May Ask for Repayment if You Fall Into One of These 5 Categories

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As the IRS has time to review stimulus funds sent over the past two years, it's probable that some people will learn that they must repay the money.

Key points

  • The IRS distributed millions of stimulus checks in record time. It's inevitable that mistakes were made.
  • If you received funds from the IRS for which you were not eligible, you may be asked to repay the money.

Given the speed with which the IRS managed to get stimulus payments into bank accounts over the past two years, it should come as no surprise that some mistakes were made. It may have been as simple as a stimulus payment being sent to someone who earned too much money to be eligible. Whatever the issue, don't be surprised to hear from the IRS if you fall into one of the following five categories.

1. You earned too much

Each of the three stimulus checks carried a strict income threshold. Once a person (or family) hit that threshold, their stimulus payment was phased out. Out of the millions of stimulus checks sent in 2020 and 2021, it's reasonable to imagine that some were later found to be distributed to people whose income exceeded eligibility. And here's the thing about tax-related mistakes: It can take years for the nation's tax collection agency to catch a mistake. When it does, though, it's safe to expect the IRS to make contact.

It's important to remember that the IRS never calls, texts, or sends an email, unless it's in response to a message you've sent the agency. If they need to contact you regarding an overpayment, they will send an old-fashioned letter to your last known address.

2. You received a check for someone who died

The last few years have been a blur for most of us, with hundreds of thousands losing someone they love. The date of that person's death determines whether you (or anyone else) has a right to keep their stimulus check. If a loved one died sometime in 2019, the IRS likely did not know about the death when it sent the first round of stimulus checks in 2020. For that reason, the IRS says the portion sent in the name of the deceased should be returned.

Let's say you're married, and your spouse died in 2019. You hadn't filed 2020 taxes yet, so the IRS did not know about the death. Checks sent in April 2020 were for $1,200 per eligible adult. If you received $2,400 ($1,200 for you and $1,200 for your spouse), you may learn that you must return the $1,200 sent to your spouse.

To date, there has been so much confusion surrounding the issue that several different schools of thought have made their way into the public forum. However, according to the IRS, payments sent in 2020 but intended for people who died in 2019 should be returned.

There's no guarantee the IRS will come after anyone whose loved one died prior to 2020, but it's important to acknowledge that it can happen.

3. You're a non-citizen

If you've lived in the U.S. for years, paid income taxes, but are not yet a citizen yourself, you may have been sent a check. If so, it's possible the IRS will discover the mistake and request a refund.

4. You received an extra check

So many checks have been sent, it's possible that a percentage of individuals received more than one payment for the same round. If you were eligible for stimulus funds but received more than one check during the first, second, or third round, don't be surprised if the IRS asks you to return those extra funds.

5. You're considered a nonresident alien

If you're a nonresident alien, working in the U.S. and paying U.S. taxes, you may have received stimulus funds. If so, you're not eligible and may be asked to return the money.

What to do if you receive the dreaded "letter"

As mentioned, if the IRS spots a problem with a previous tax return, they will send a letter outlining the issue. If they're wrong, you have a right to dispute the matter. The IRS's letter will outline the next steps in the process. If you agree with IRS concerns, here are the steps to take:

  • If you've already cashed the check: Make a check or money order out to the U.S. Treasury for the amount owed. Include your Social Security number (or taxpayer identification number). Include a note letting the IRS know why you're returning the funds.
  • If you have the original check: Write "VOID" on the back of the check (where you would normally endorse the check). Include a note explaining why it's being returned. If it's because your spouse died in 2019, the IRS will reissue a check in your name only.

If you do receive notification from the IRS, don't panic. Despite rumors to the contrary, the IRS is typically easy to work with. The important thing is to respond in a timely manner. The quickest way to get a letter to the agency is to mail it to the IRS office serving your region.

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