As many as 1.2M stimulus payments may have been mistakes

Of the 175 million advance Recovery Rebate Credits issued by the Internal Revenue Service in 2021, more than 1.2 million payments worth $1.9 billion may have gone to ineligible people, according to a new report.

The report from the Treasury Inspector General for Tax Administration also found that as many as 644,705 individuals who are eligible for payments worth a total of $1.6 billion haven’t received them.

The payments were mandated by the American Rescue Plan Act that was passed in March 2021, and required the IRS to send out payments of up to $1,400 to eligible taxpayers by Dec. 31, 2021, and to make “plus-up” payments to those whose initial payments, based on their 2019 tax returns, were insufficient based on the 2020 returns they later filed.

An audit conducted by TIGTA found that the overwhelming majority (99.48%) of the 167.4 million recipients got the correct amount, but also found many of the relatively few erroneous payments this time around were based on deficiencies that it had uncovered in an audit of the Economic Impact Payments issued under the CARES Act in 2020. The IRS had been warned about these problems, but hadn’t fixed them.

Of the 1.2 million potentially incorrect RRC payments issued, TIGTA found:

• 544,323 worth $856 million went to people who were claimed as dependents on others’ tax returns;
• 342,173 worth $579 million went to nonresidents and people living in U.S. territories;
• 191,768 individuals received duplicate payments worth $271 million due to changes in filing status or their partner;
• 60,824 payments worth $109 million were issued because of programming errors (see our story); and,
• 26,468 payments were made to dead people.

As part of its audit, TIGTA made seven recommendations to IRS management, including making payments to all those who were eligible but hadn’t been considered for them, and letting everyone who didn’t receive a payment know that they may be able to claim the credit on their 2021 tax return. The inspector general also recommended a number of programming changes to IRS systems to ensure eligible taxpayers, such as those with ITINs or who have incorrect territory markers, weren’t bypassed.
IRS management agreed with all seven of the recommendations, and the service has begun work on the necessary programming changes, and on both traditional and social media campaigns to alert taxpayers who may be eligible for payments.