Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer
5/8/2020

Updated Economic Impact Payment Guidance

The IRS has finally issued some Q&A on Economic Impact Payments (EIP) that were received by deceased individuals and how they need to be returned. The IRS also took the opportunity to address other individuals that may have received EIP, but were not entitled to the payments and must return the funds.

As a reminder, if it was a closed account, U.S. Treasury Payments needed to be returned right away. According to information in the Green Book (page 4-2), the RDFI should return the payment. The Green Book states in Chapter 4 that all ACH payments must be returned in accordance with the Nacha Operating Rules and Guidelines, including when an account is closed or does not exist. Most ACH returns to the IRS will result in a paper check being issued; therefore, RDFIs must make appropriate use of Return Reason Codes. Please see Bureau of the Fiscal Service Reference & Guidance for more information. 

IRS Q&As on EIPs can be found here and are continually being updated, so check back often. However, for your quick reference, here are several Q&As that relate to individuals not eligible to receive/keep the funds and how to return the funds.

Q10. Does someone who has died qualify for the Payment? (May 6, 2020)

A10. No. A Payment made to someone who died before receipt of the Payment should be returned to the IRS by following the instructions in the Q&A about repayments. Return the entire Payment unless the Payment was made to joint filers and one spouse had not died before receipt of the Payment, in which case, you only need to return the portion of the Payment made on account of the decedent. This amount will be $1,200 unless adjusted gross income exceeded $150,000. 

Q11. Does someone who is a resident alien qualify for the Payment? (May 6, 2020)

A11. A person who is a non-resident alien in 2020 is not eligible for the Payment. A person who is a qualifying resident alien with a valid SSN is eligible for the Payment only if he or she is a qualifying resident alien in 2020 and could not be claimed as a dependent of another taxpayer for 2020. Aliens who received a Payment but are not qualifying resident aliens for 2020 should return the Payment to the IRS by following the instructions about repayments.

Q12. Does someone who is incarcerated qualify for the Payment? (May 6, 2020)

A12. No. A Payment made to someone who is incarcerated should be returned to the IRS by following the instructions about repayments. A person is incarcerated if he or she is described in one or more of clauses (i) through (v) of Section 202(x)(1)(A) of the Social Security Act (42 U.S.C. § 402(x)(1)(A)(i) through (v)). For a Payment made with respect to a joint return where only one spouse is incarcerated, you only need to return the portion of the Payment made on account of the incarcerated spouse. This amount will be $1,200 unless adjusted gross income exceeded $150,000.

Q&A 41 addresses the very specific process to return the funds – including direct deposits that were made into open accounts, because as noted above direct deposits into closed accounts needed to be returned according to NACHA rules.

Q41. What should I do to return an Economic Impact Payment (EIP)? (May 6, 2020)

 A41. You should return the payment as described below.

If the payment was a paper check:

  • Write "Void" in the endorsement section on the back of the check.
  • Mail the voided Treasury check immediately to the appropriate IRS location listed here under Q41.
  • Don't staple, bend, or paper clip the check.
  • Include a note stating the reason for returning the check. 

If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:

  • Submit a personal check, money order, etc., immediately to the appropriate IRS location which you can find here under Q41.  
  • Write on the check/money order made payable to “U.S. Treasury” and write 2020EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.
  • Include a brief explanation of the reason for returning the EIP.

As always, CUAD Members may contact Amy Kleinschmit with any compliance related questions.

 

 

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