$1.4 Billion in Stimulus Funds Sent to Dead People, Watchdog Finds

0
0

WASHINGTON — The Trump administration delivered more than a million stimulus payments worth about $1.4 billion to dead people in a rush to pump money into the economy this year, the Government Accountability Office said on Thursday.

The Treasury Department, working with the Internal Revenue Service, raced to deliver nearly $270 billion in economic impact payments to Americans this spring. But a chunk of the money ended up in the wrong places as a result of internal administration decisions, including failing to consult death records to ensure that deceased people were not receiving funds.

The improper payments reflect some of the wasteful government spending that occurred in the wake of the rapid economic stabilization effort that was undertaken after Congress passed a $2.6 trillion bailout package in March.

“The agencies faced difficulties delivering payments to some individuals, and faced additional risks related to making improper payments to ineligible individuals, such as decedents, and fraud,” the report said.

The G.A.O., a nonpartisan agency, said that officials at the I.R.S. and the Treasury Department were aware of the risk that payments could end up going to the deceased even as the legislation was being drafted in March. Lawyers at the I.R.S. determined that they could not legally deny payments to people who filed their tax returns in 2018 or 2019, even if they had since died. The improper payments were sent in the first three batches of distributions that went out through the end of April.

Treasury officials told the accountability office that because they were trying to deliver the payments “as rapidly as possible,” they used operational procedures that were last used for sending out stimulus money in 2008. That system did not use death records to prevent money from going to the deceased.

The G.A.O. noted, however, that the I.R.S. had put in place a system in 2013 to update tax accounts with death records to address concerns that tax refunds were improperly going to the dead. Because this control was bypassed to get the stimulus money out faster, “the risk of potentially making improper payments to decedents” increased.

Despite the fact that I.R.S. officials notified Treasury about its initial concerns, a Treasury official in the Office of Tax Policy told the G.A.O. that it was not aware that the money might go to the deceased. Lawyers at the agencies later determined that people should not be sent an economic impact payment if they were dead at the time the payment was made. They determined that would be an “improper payment” under the Payment Integrity Information Act of 2019 and started removing those payments from the system for the fourth batch of money that was to be distributed.

It is not clear what action the administration can take to claw back the money, some of which was sent directly to bank accounts through direct deposit. Treasury Secretary Steven Mnuchin said in April that the heirs of the deceased who received stimulus money should give the funds back.

The Treasury Department had no comment as to whether it might resort to litigation if heirs do not heed that advice. However, a Treasury spokeswoman noted that the I.R.S. had provided instructions for returning that money.

A spokesman for the Internal Revenue Service did not immediately have data on how much, if any, of the money that went to the deceased had been returned.

Michael J. Graetz, a Columbia University law professor and former deputy assistant secretary for tax policy at the Treasury Department, said government money improperly going to the dead is a continuing problem when it comes to tax refunds and Social Security payments. In fact, improper payments for a broad range of expenses have been a long-term problem for the federal government. The G.A.O. reported that from 2003 to 2017, estimates of improper payment totaled about $1.4 trillion cumulatively.

But retrieving the money can be more expensive than absorbing the loss. Mr. Graetz said that while cashing a check that was sent to a dead person is illegal, the cost of trying to get back the money is most likely not worth it to recoup the $1,200 payments.

Still, he noted that such mistakes were the unfortunate consequence of pushing money out so quickly.

“It’s not chump change,” Mr. Graetz said. “A billion here, a billion there, and pretty soon it adds up.”

The accountability office called on the I.R.S. to find ways to notify ineligible recipients of how to return payments, though it did not explain how that would work with regard to those who are deceased. It also suggested that Congress ensure that the Treasury and its Bureau of the Fiscal Service, which distributed the payments, gain full access to the Social Security Administration’s death records. The I.R.S. agreed with the recommendations, according to the report, and an I.R.S. official said the agency was considering options for notifying ineligible recipients about how to return the funds.

In recent months, people have been perplexed to receive money from the government marked for their dead relatives.

Sherry Phillips, 65, of Rochester, N.Y., noticed a deposit of $1,200 in an account that she held jointly with her mother, who died in 2019. She had left the account open to handle her mother’s remaining expenses and to file her 2019 returns.

Ms. Phillips received a signed letter from President Trump in April notifying her of the payment with the letters “Decd” next to her mother’s name to indicate that she was dead.

“My mother is dead and does not need the money,” said Ms. Phillips, who is not sure what she is supposed to do with the payment. “I do not need the red tape this will undoubtedly create.”

The report comes as Congress and the Trump administration are discussing whether to fund another round of stimulus payments.

 » Read More

Loading...

LEAVE A REPLY

Please enter your comment!
Please enter your name here