IRS Refused to Pay Stimulus Checks, Wrongly Claiming Some Taxpayers Were Dead
IRS Refused to Pay Stimulus Checks, Wrongly Claiming Some Taxpayers Were Dead

By Jack Phillips

An audit of the Internal Revenue Service (IRS) shows that the agency did not send stimulus payments and checks to some living people, claiming they had already died.

During the pandemic, according to the Treasury’s inspector general office, when taxpayers attempted to get stimulus checks, they were told their accounts were locked because the IRS believed they were dead. The inspector general’s office also said that tens of thousands of accounts were deadlocked, meaning that taxpayers didn’t get their stimulus payments but were also blocked from filing tax returns or getting refunds back.

“Although the deceased account lock is designed to prevent the filing of fraudulent tax returns, when there is an error, the unintended consequence is that legitimate taxpayers cannot file a tax return and receive a refund,” the Treasury’s inspector general said in a report (pdf) last week. “These errors increase taxpayers’ burden to get the matter resolved as well as the IRS‘s workload due to the receipt of additional telephone calls or correspondence from taxpayers.”

The Treasury’s inspector general had flagged 77,868 accounts that were erroneously deadlocked as of Jan. 1, 2022. As of the issuance of the report, the IRS found that 20,222 had not yet been unlocked.

“Management noted that taxpayer accounts were improperly locked because of both human and computer programming issues when identifying the appropriate taxpayer account to be locked,” the report stated. “We evaluated the IRS’s actions to correct the 20,222 erroneously locked accounts and found that the IRS has corrected all but 63 taxpayer accounts.”

It added: “We also evaluated the IRS’s rationale for the remaining 57,646 and agree that these taxpayer accounts should remain locked. The IRS noted these accounts should remain locked due to reasons such as, information returns, e.g., Form 1099 series, have not been filed in years for the accounts, and no tax returns were filed on some of these accounts in five or more years.”

Individuals’ accounts can be locked due to the Social Security’s master death list. They can also be locked because of an error at the IRS itself, according to the audit.

Among other recommendations, the Treasury’s inspector general said the IRS should say on its notice that taxpayers can go to the IRS to directly clear the death-lock. Instead, some people went to the Social Security Administration.

The IRS told the Washington Times that it rejected the idea of updating the notice and said that taxpayers “should not hesitate” to contact the agency if they cannot resolve the lock.

Other Problems

Meanwhile, another review carried out by the same watchdog found that the tax agency lost track of thousands of microfilm cartridges containing millions of sensitive business and individual tax records of Americans.

That report, issued on Aug. 8 by the Treasury’s inspector general, blamed the IRS for being sloppy in the way it handles sensitive taxpayer information that could be used by criminals to commit identity theft and tax fraud.

“The IRS is not in compliance with records management requirements,” the report states. It points to “significant deficiencies” in the way the IRS safeguards, stores, and accounts for microfilm cartridges that are used to backup and store photographic records of sensitive business and individual tax information. “Deficiencies result in the inability of the IRS to account for thousands of microfilm cartridges containing millions of sensitive business and individual tax account records,” the watchdog report states.

At the Ogden facility, the IRS lost track of as many as 168 microfilm cartridges containing up to 2,000 photographic images each that were supposed to have been held in seven boxes that the watchdog discovered were empty.

“IRS personnel in Ogden were unaware of the current location of these cartridges. Because the prior microfilm contractor went out of business abruptly in 2018, it is unclear where these microfilm cartridges are located at this time,” the report stated.

Tom Ozimek contributed to this report.

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