Coronavirus: IRS sends stimulus checks to deceased Americans, warns relatives forgery is a federal crime

SAN FRANCISCO (KGO) -- As we've reported, families across the country have been getting stimulus checks for loved ones who have died. And the IRS wants that money back. But now folks are confused and worried about an ominous warning on many of those checks.

This has created more anxiety during already anxious times. Grieving survivors wondered what to do with payments made out to their loved ones. On top of that, many checks came with a subtle threat: doing the wrong thing could land them in prison.

"Maximum penalty is a $10,000 fine and 10 years imprisonment." Amy from Petaluma saw that dire warning on the stimulus check sent to her deceased mother. Forgery is a federal crime, punishable by ten years in prison.

"So it was really pretty shocking. I had no intention of keeping money that doesn't belong to me... It's like, I mean they're putting the onus on us. It shouldn't have come to us in the first place," Amy said.

Amy's mother Shirley died two years ago, but the IRS still sent her a stimulus payment and it says "deceased" right there on the check.

"It was clearly noted she was deceased,'' she said. "So I don't know why they are sending it to me in the first place and then they put the onus on us to send it back, with this (warning) on the envelope."

RELATED: IRS stimulus checks sent to millions of dead people, here's how to send it back

Even more puzzling were the instructions on the envelope. It says that if the recipient is deceased, check the box on the envelope and drop the whole thing in a mailbox.

That didn't seem too safe.

"My greatest fear is if I follow that instruction and just drop it in a mailbox, you know, it might get stolen or lost and it might never get there, and I might be accused of taking money that didn't belong to me," Amy said.

The same thing happened to Marge in Los Altos. The IRS sent her mother a check two years after her death. Marge "did" drop it in the mailbox as directed. Guess what happened?

The check came right back to her.

She told 7 On Your Side, "I just wanted to get rid of it."

"All of these warnings are scaring people in a time when they don't need to be scared,'' said Nina Olson, former taxpayer advocate at the IRS, now founder of the Center for Taxpayer Rights . "And they certainly don't need to be paying for legal advice as to what to do with this payment that's meant to help them get through economic emergencies and they've done nothing wrong. They've been sheltering in place and this came to them affirmatively from the government.""

Olson believes the IRS has no legal right to demand the money back because the CARES Act specifies the payments are sent to Americans based on their 2018 and 2019 tax returns. "It doesn't say but don't pay it out to anybody who's deceased,'' she said. "It could very well have said, but don't pay it out to deceased people. And it didn't."

She noted even families who just lost a loved one to COVID-19 are now told to return the money.

"So I've been following Michael Finney's reports, and yesterday it gave me some confidence," she said.

As we reported, the IRS has updated its website telling the heirs of deceased people they "should" send the money back. It then gives detailed instructions on how to do so, including writing "void" on the check and returning it to the local IRS service center. If the money was direct deposited, folks must write a personal check to the IRS and include a note explaining why the money is being returned. The IRS did not say why those instructions conflict with those on the envelope containing the stimulus checks.

Olson says the CARES Act specifically says the government won't try to claw back stimulus overpayments. And in other cases, it has not. For example, the legislation provides parents an extra $500 payment for children under age 17. But many children turned 17 after their parents' last tax filing. They got paid anyway, and the IRS has said it will not ask for that money back.

Treasury Secretary Steven Mnuchi and many legislators say the payments were not meant for people who have died -- only those now trying to weather the current economic disaster caused by the pandemic.

Many survivors tell 7 On Your Side they just want to send loved ones' payments back -- safely. Amy says her mom would want the money to help someone in need.

"I definitely would rather it go to someone who is unemployed or underemployed,'' she said "We're all in this together, right?" said Amy.

If you want to return an economic impact payment, read the 7OYS guide here.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

If you have a question or comment about the coronavirus pandemic, submit yours via the form below or here.

Get the latest news, information and videos about the novel coronavirus pandemic here


Copyright © 2022 KGO-TV. All Rights Reserved.