At the time of the first stimulus checks, many people faced a dilemma when they received the stimulus payment for a deceased spouse or other family members. They weren’t sure at the time what to do with this stimulus check. Many Americans will face the same dilemma this time as well. However, the IRS has changed the rules which will help people know what to do with the coronavirus stimulus checks of a deceased spouse or other family members.
At the time of the first stimulus payment, the IRS sent about 1.1 million coronavirus stimulus checks to dead people, amounting to about $1.4 billion. After realizing the mistake, the agency asked those who got the payment on behalf of the deceased, to return the money.
However, the rules were changed with the second round of stimulus payments of up to $600, as well as the third round of up to $1,400. Following the rule change, the second stimulus check for those who died in 2019 or earlier must be returned.
However, the legislation that authorized the third stimulus package of $1.9 trillion says that people who died in 2020 are not eligible for the stimulus check. However, those who died in 2021 still qualify for the stimulus payment.
So, in case you received the payment for a deceased person, who is not entitled to, then you must return it.
“A [stimulus] payment made to someone who died before receipt of the payment should be returned to the IRS by following the instructions about repayments,” says the guidance on the IRS’ website.
The person receiving the payment needs to return the full amount except in the case of joint filers, where one spouse was alive before the receipt of the payment. In such a case, the spouse needs to return the portion made to the deceased spouse.
You can claim Recovery Rebate Credit also
It is possible that those who died in 2020 may qualify for the stimulus checks through the Recovery Rebate Credit. This means if you are filing a return for a deceased relative, who passed away in 2020 or 2021, they may qualify for the stimulus payment in the form of a Recovery Rebate Credit.
However, the deceased person should meet the eligibility criteria, i.e. they weren’t claimed as a dependent and had a Social Security number.
The Tax Relief Act of 2020 raised the phaseout income for a widow or widower from $75,000 to $150,000. So, a widow or widower with an income higher than $75,000 would qualify for the Recovery Rebate Credit.
To claim the payment of an individual who died in 2020 or 2021, you need to fill out the Recovery Rebate Credit Worksheet. This worksheet is available in the Instructions for Form 1040. You also need to fill out 1040-SR to determine whether or not you can claim the payment.