IRS wants some coronavirus stimulus checks back. But why?

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Many discussions currently are focused on the next round of coronavirus stimulus, including if it will include direct payments and when it will be approved. The IRS, it seems, is still stuck with the first round and now wants back some of the money it sent via coronavirus stimulus checks. The agency now wants the prison and jail inmates to return their stimulus checks.

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IRS wants some coronavirus stimulus checks back

The IRS has sent out almost all the stimulus checks so far promised by the CARES Act, including hundreds of thousands of dollars to those in jail and prison as well. Now, the IRS wants those jail and prison inmates to send the money back, claiming it was mistakenly sent, according to the Associated Press.

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The CARES Act, which was passed in March, did not specifically exclude jail or prison inmates from the coronavirus stimulus checks. In the first week of May, the IRS first noted on its website that people in jail and prison do not qualify for the coronavirus stimulus checks.

As of now, the IRS does not have many details on the amount or the number of checks sent to incarcerated people. The agency, however, has asked the State corrections departments to track such payments and get them back.

If the initial data from some of the states are to be believed, then the numbers could be huge. For instance, the Kansas Department of Correction detected over $200,000 of such checks by early June. Idaho and Montana combined intercepted more than $90,000, while Washington intercepted about $23,000 by early June. A few states, such as Nevada are not revealing the numbers.

Can IRS ask prison and jail inmates to return money?

The IRS is not very clear on what grounds or authority it wants to retrieve the stimulus checks from the inmates. On its website, however, the department points to a Social Security Act. This act excludes incarcerated people from some old-age and survivor insurance benefit payments.

“I can’t give you the legal basis. All I can tell you is this is the language the Treasury and ourselves have been using,” IRS spokesman said, as per the Associated Press. “It’s just the same list as in the Social Security Act.”

Some tax and legal experts, however, say that the IRS has no legal basis for asking the jail or prison inmates to return the coronavirus stimulus checks.

Tax attorney Kelly Erb, suggests there no such rule that the IRS is citing to get the money back from the jail or prison inmates.

“In fact, the IRS actually says that stuff on its website isn’t legal authority. So there’s no actual rule — it’s just guidance — and that guidance can change at any time,” Erb says, as per the Associated Press.

Similarly, Wanda Bertram, a spokeswoman for the Prison Policy Initiative, said that the IRS is “just making it up.” Bertram said the stimulus checks could prove a life-saver for the inmates and their families.

Should IRS ask for money?

Over the past few months, prisons have released thousands of inmates to limit the spread of coronavirus. Bertram notes that the stimulus money could help such people to settle down.

Apart from those that have been released, the stimulus money could prove valuable to those inside the prison as well. Inmates can use this money to buy better quality food and other necessities from prison commissaries. Usually, friends or family transfer funds to the inmates, but it is possible many would have lost jobs during the coronavirus pandemic.

“Loved ones right now are also under a squeeze because of the pandemic and being out of a job, so when you send a stimulus check for someone, the person in prison is not the only one who benefits from that,” Bertram said, according to Associated Press.

Another drawback of intercepting the stimulus checks could be for the Black and Hispanic inmates. As per the data from the U.S. Department of Justice’s Bureau, the Black and Hispanic have a higher incarcerated rate than white Americans.

Clarity for next stimulus package

Now that the issue has come up of whether the jail or prison inmates are eligible for the coronavirus stimulus checks or not, it would be interesting to see how (or if) the second stimulus package would address this. The CARES Act did not specifically exclude such people from the stimulus checks.

There is still some time left for the next stimulus package. Hopefully, this issue would get resolved by then, and we will have clear details on the eligibility of the jail and prison inmates. Clarity on such things is crucial because the next stimulus package is also expected to include direct payments.

President Donald Trump, earlier this week, reiterated support for the stimulus checks. When asked by Scripps if he plans to give direct payments again, Trump said, "Yeah we are. We are." On the next stimulus package, Trump said, “It'll be very good, it'll be very generous."

Trump, however, did not share details on how much the payments would be that Americans can expect this time. The CARES Act, which was passed in March, approved payments of up to $1,200 per person.