Of Mountains and Molehills: A Further Analysis of EIP To Dead People

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Earlier today Nina Olson discussed EIP being issued to deceased taxpayers. Professor Bryan Camp responds to that post below. Les

I agree with much of Nina Olson’s thoughtful post this morning on PT.  However, I also think both Nina’s analysis and the IRS FAQ may be wrong to make no distinction between people who died before or after January 1, 2020.  

This post will first explain why date of death may be an important distinction.  It will then argue that concerns about the IRS making erroneous EIP payments to dead people is making a mountain out of a molehill.


(1) It May Matter When Death Occurred

Section 6428(a) creates an entitlement to a refundable credit for tax years starting in 2020.  My take is to start with the entitlement.  The question of who is entitled to what amount of refundable credit is covered by (a).  It allows an “eligible individual” a “credit against the tax imposed by subtitle A for the first taxable year beginning in 2020.”  

I do not read §6428(f) as creating an entitlement separate from subsection (a). Its purpose is to authorize the advance payment of that to which an “eligible individual” is entitled.  It both authorizes the IRS to send out a payment of the 2020 refundable credit in advance of taxpayers claiming the credit and it requires the IRS to figure to whom it should send the advance credit based on 2019 or 2018 returns.    

Supporting my reading of how these two subsections work together is the true-up language in subsection (e).  It creates a one-way ratchet that directs taxpayers to offset their claimed 2020 credits against the advanced payments they actually received.  Thus advanced payments will reduce the amount of credit taxpayers can claim on the 2020 returns.  Importantly, however, the amount offset cannot reduce their 2020 credit below zero.  That permits taxpayers to keep excess advance payments while being able to claim underpaid credits. 

The true up provisions are the reasons why taxpayers whose 2018 or 2019 returns show the existence of a dependent do not have to return the $500 they receive if the dependent has ceased being a dependent in 2020, for whatever reason (including death of the dependent).  The $500 will have turned out to have been erroneous because—again go to (a)—the basic entitlement is that this is a refundable credit for tax year 2020.  

I think it important to note that the true-up (and consequent forgiveness of erroneous advance payment) occurs only when determining the tax obligations for 2020, which for most people will happen on a 2020 return.

Folks who died before January 1, 2020, are not entitled to the refundable credit authorized by subsection (a).  Perhaps obviously, neither will such folks be able to file a return for 2020 on which to have errors forgiven by the subsection (f) true up provisions.  

Ms. Olson references the definition of “eligible individual” in §6428(d)(1).  That provision says that an “eligible individual” must actually be an individual.  It seems to me pretty plain that taxpayers who died before 2020 are no longer individuals in 2020.  Therefore, they cannot be “eligible” individuals.   

In short, I do not agree that (f) creates a separate entitlement to an amount.  It creates an entitlement to timing of an amount.  But that is just my reading.  I think Ms. Olson and others have a reasonable position that taxpayers who died in 2018 or 2019 are indeed eligible to receive the advance payment of the 2020 refundable credit.  You get there by reading subsection (f) as creating an entirely separate entitlement from subsection (a).  The strongest support for doing that is the language in subsection (f)(1) and (f)(2) that seems to create a counter-factual that pretends the credit allowed by (a) “would have been allowed as a credit under this section for such taxable year.”  

I disagree with that interpretation but for purposes of keeping this post short let’s just leave it that this: I think everyone agrees (or should agree) that EIP payments sent to taxpayers who died after January 1, 2020 are proper but there is disagreement about the legality of payments made to taxpayers who died before January 1, 2020.  Given that, the more important question is perhaps, what should be done?

Here’s my answer.

(2) Chill

Assuming some payments to dead people are erroneous, what should the IRS or Congress do about it and what should taxpayers do about it?

(A) IRS and Congress

The IRS does an amazing and fantastic job in determining and collection the correct tax for taxpayers.   But when you are dealing with over 150 million individual taxpayers and trillions of tax dollars, a small percentage of error looks like a really big number.  That is the political game that Congress and others repeatedly and disingenuously play with the IRS.  Various so-called “oversight” functions repeatedly express horror! horror! that the IRS either erroneously over-collects or erroneously under-collects billions of dollars per year. 

Get a grip.  Chill out.  If you want perfection, die and go to Heaven.  Otherwise, you have to evaluate the nature of the errors and what it costs to fix them.  

So it is here.  In 2018 this CDC report said about 2.8 million people died.  Let’s say 2.5 million of them were taxpayers.  And let’s say another 2.5 million died in 2019.  So that’s 5 million erroneous payments of $1,200 each.  Looking at the back of my envelope that adds up to $6 billion in erroneous refunds.  Max.  Heck, I bet that’s just a drop compared to the money Congress wastes in spending each year. 

The IRS has more important matters to deal with than to go chasing some theoretical 5 million payments made to taxpayers who died in 2018 or 2019.    

Also, the IRS has extremely limited tools to collect back those amounts.  That is because these erroneous EIP payments are very much like non-rebate erroneous refunds.  When the IRS sends an erroneous refund because of some error in determining a taxpayer’s correct tax (such as mistakenly allowing a deduction or exclusion that should not have been allowed) such refunds create a deficiency that the IRS can get back by either acting with the appropriate limitation period to re-assess the tax (and then collect administratively by offset or lien or levy) or by filing suit to recover the erroneous refund under §7422 within the time permitted by §6532.  

In contrast, erroneous refunds that result from some action that is not connected to a determination of liability (such as a clerical error in inputting a $100 as $1,000 and sending $900 back to the taxpayer) are called non-rebate erroneous refunds and those may only be collected by filing suit. United States v. O’Bryant, 49 F.3d 340 (7th Cir. 1995)(“The money the O’Bryants have now is not the money that the IRS’ original assessment contemplated, since that amount was already paid.  Rather, it is a payment the IRS accidentally sent them. They owe it to the government because they have been unjustly enriched by it, not because they have not paid their taxes.”).

I think the EIPs sent to folks who died before 2020 would be, technically, rebate refunds because they would be connected to a substantive determination that they were entitled to the refund, based on their 2018 or 2019 filed returns.  The determination would be erroneous.  But they would be, functionally, like non-rebate refunds because a TP who died before Jan 2020 cannot, by definition, have a deficiency of tax for 2020.  So forget re-assessment. Also, fun fact: that also means there is no transferee liability for the heir or family member who cashed the EIP check and used the erroneous EIP payment.

So if my reading is correct, there is no opportunity to re-assess and the only action the IRS can take is to beg the Department of Justice Tax Division to file suit.

Good luck with that.  The DOJ is unlikely to file suit.  It’s a busy place and filing a suit for $1,200 is just not worth their time and effort.  

So to the IRS I would say: Chill out.  Let it go.  To Congress I say: move on.  Go do some actual oversight on the huge opportunities you have created for graft and corruption in the distribution of various relief funds you created.  Leave the dead alone.  

(B) Taxpayers 

Just because the IRS may not have the proper tools to collect an erroneous refund, however, does not mean a taxpayer has no legal duty to return it.  

I would advise a client who received an EIP check or direct deposit for a taxpayer who died before January 1, 2020 to contact the Service for instructions on how to return the EIP.  My reading of the law is that the client has a legal duty to return the money.  The notion that there is no legal duty to return a payment made to you in error by the federal government is not only a dangerous notion, it is flat out wrong.  Taking something that is not yours and to which you have no right to is generally called stealing.  The notion that you cannot steal from the federal government denigrates the rule of law by suggesting legal rules do not apply as between a citizen and the government.  

More importantly the notion is also belied by 18 USC §641.  That statute makes it a felony to steal more than $1,000 from the federal government.  

This type of scenario is not limited to EIP.  The IRS sends out billions of non-rebate erroneous refunds each year.  I tell my students that they need to advise their clients who receive a non-rebate erroneous refund to contact the Service for instructions on how to return the money.  They should explain 18 USC 641 to their clients.  There is, in fact, a legal duty to return that to which you are not entitled.  

So yes, taxpayers who got EIP payments for folks who died in 2018 or 2019 do, IMHO, have a legal duty to return the money. However, the IRS is unlikely to be able to enforce it.  That is why the FAQ uses the word “should” which is similar to the language that the Service uses in letters to TPs asking them to return non-rebate erroneous refunds.  

But to say that a taxpayer has no legal duty just because the IRS cannot easily enforce the duty is not good.  It undermines the rule of law to say one need not comply with the law just because one is unlikely to get caught or punished.  We already have a HUUUGE problem with the guy currently stinking up the White House undermining the rule of law in this country.  Just because he is corrupt does not mean we have to be.  


  1. Kevin J. Todd says

    I was 100% on board with this post until the last two sentences. I don’t think the commentary was necessary or relevant and distracts for the very effective arguments in the post.

  2. John M Colvin says

    While you are technically correct that there is no transferee liability under Section 6901 of the Internal Revenue Code, there may exist fiduciary liability under 31 U.S.C. Section 3713 or transferee liability under the various state fraudulent (voidable) transfer (conveyance) acts. While it is unlikely that the DOJ Tax Division would file suits to recover the relatively small amounts at issue, there is the still a theoretical possibility of such exposure.

  3. Ed Morrow III says

    Awesome analysis to which I concur 100%

  4. Part of the rule of law is consistency. Otherwise, res judicata and collateral estoppel would not permit judges to compound their mistakes. What bothers me (and others, like Nina Olson) is that the 2020 interpretation of the same statute by IRS is the opposite of 2008 – and billions in payments had been made, before the change was announced. Then no reason is given for the change and it is applied, clearly erroneously, to 2020 decedents.

    (And yes, I agree that “ EIP payments sent to taxpayers who died after January 1, 2020 are proper” – but I would also allow them for the 7,000 or so Americans who died on January 1 itself.)

    If a widow used the EIP to pay off the credit card on which she had charged the funeral, do I tell her that failure now to send it back is theft? Does it matter that her wealthier neighbor plans to keep the money and knows there will be no recovery attempt?

    I have a client whose adult son died in 2018. She goes to meetings of Mothers Who Lost A Child. These checks are the major topic of conversation. I wonder if IRS knows the emotional harm it caused by creating this issue.

    The mailed checks now arrive in an envelope with a box to check next to this instruction:
    Check here and drop in mailbox.”

    Presumably it is the envelope, not the recipient, who should be placed in the mailbox. This reminds me of those oblong keychain attachments from motels, no more than 50 years ago, that guaranteed return postage if dropped in any mailbox. But I digress. Are letter carriers following these instructions? Are survivors taping up the envelopes before remailing them?

    The payee’s name on the check is now followed with a “Decd” and reportedly some banks are refusing to cash them. What if the estate filed an amended return claiming a refund for 2017 because of an error made by a dying taxpayer – will those checks be refused, also?

  5. Francine Lipman says

    Applying this logic it seems that someone who was not claimed as a dependent in 2019, but is claimed as a dependent in 2020 would have to pay any advanced payment back because they are not an eligible individual. Similarly, a NRA in 2020, but a RA in 2019 would also have to pay any amount received back? Thanks for your thoughts and analysis.

  6. Bryan Camp says

    @Kevin: sorry you felt let down by the last bit; glad you found the rest useful.

    @Francine: Sorry but I’m having a hard time following your hypo. The test for an eligible individual in subsection (d) excludes an “individual with respect to whom a deduction under section 151 is allowable to another taxpayer…” Thus, the test is not whether or not a person was claimed (“allowed”) as a dependent but whether they could have been claimed ( “allowable”) as a dependent. Your hypo does not tell us whether taxpayer X, who was not actually claimed as a dependent by taxpayer Y in 2019 could have been so claimed.

    Let’s run it two ways.

    First, let’s assume X was not allowable to Y as dependent in 2019 or in 2020. That means Y would have received $1,200 but would not have received the extra $500 advance payment. It also means that X, assuming X filed a 2019 return in time, or else had filed a 2018 return, or otherwise was able to get in the advanced payment system, would received $1,200. Now when both X and Y file their 2020 returns, they would each claim $1,200 credit and that would be offset by the amount actually paid them. No error.

    Second, let’s assume that X was allowable to Y as a dependent in 2019, yet Y did not claim X. Again, Y receives $1,200 and X, assuming X filed a 2019 return or else otherwise was able get in the advanced payment system, also receives $1,200. Again, both taxpayers file 2020 returns where they claim the correct 2020 refundable credit. Assuming X is still allowable to Y as a dependent in 2020, the Y will claim a credit of $1,700, report advance payment of $1,200 and claim the remaining $500 on the 2020 return. In contrast, X will report zero credit, report receiving $1,200 advance payment but, thanks to the language in (e) X will not have to repay any of the $1,200.

    This second hypo is very close to a very common situation, where X is allowable as a dependent on Y’s 2019 return but not on Y’s 2020 return. The result would be the same except that now Y’s 2020 return would claim a refundable credit of $1,200 but report advance payments of $1,700. Again, no requirement to pay back the erroneous refund.

    There are lots of other permutations we can run, but I don’t see any of them where a taxpayer who files a 2020 return has to return any amount of an advanced payment that was erroneous. But it could be I am not looking hard enough. The key to me is whether a person files a 2020 return to report both the amount of what subsection (a) says is a refundable credit for the year 2020 and the amount of whatever was received as an advance payment of that credit.

    If nothing else, this confusion over whether (f) creates a different substantive entitlement than (a) is just another reason for Congress and the IRS to let these payments to dead people alone. Write it better next time.

  7. Bryan,

    Excellent post!

    I am struggling with your second hypo in your comment of 05/11.

    In the hypo, the advanced payment to the dependent is triggered by the filing of an incorrect 2019 return: the taxpayer should have checked the box indicating that “someone can claim you as a dependent.” Presumably, that would have cut off the advance payment. If so, this taxpayer secured the advance payment only as a result of filing a false return (or making a false claim to generate the payment using the “tools”).

    This, in my mind, is different from a situation where facts simply change from year to year (dependent becoming non-dependent, resident alien becoming NRA, etc.). In those situations, there is no taxpayer error or false statement.

    I agree with your discussion of the practical considerations facing government trying to recover advanced payments under current law. But, the legislation also mandates that Treasury issue regulations (or other guidance). That authority should be sufficient to issue regulations that would require re-payment of advanced payments in certain cases such as a payment triggered by a false return (i.e., recoveries that are not plainly against the purpose of the statute). In this hypo, the regulation could design a regime that would add a liability of $1,200 to the 2020 return of the dependent once the 2019 return has itself been corrected (e.g., by disallowing the standard deduction).

    • Bryan Camp says

      @Fabrice. Good points all. It is a bit dizzying to consider all the permutations. And, sadly, not all taxpayer error is unintentional. Still, many taxpayers genuinely confuse the concepts of “allowed” v. “allowable” and will not check the box if no one did, actually, claim them. I am quite sympathetic to the administrative problems all this creates for the IRS.

  8. @ Fabrice: “In the hypo, the advanced payment to the dependent is triggered by the filing of an incorrect 2019 return: the taxpayer should have checked the box indicating that ‘someone can claim you as a dependent.’ ”

    Here is an example from real life. Taxpayer filed his 2018 return, correctly showing that he was claimed as a dependent (in his last year of college). His 2019 return will show that he is not claimed, but it has not been filed yet. On April 15, IRS deposited $1,200 in his bank account — the one shown on his 2018 return. He did nothing wrong. Did IRS?

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