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Tipsheet

Here's How Ineligible Recipients Got Nearly $2 Billion in COVID Relief from the IRS

AP Photo/Susan Walsh, File

A new report released from the Treasury Inspector General for Tax Administration (TIGTA) showed that the Internal Revenue Service failed to correct issues found in earlier pandemic benefit programs and ended up sending Recovery Rebate Credit payments to deceased or otherwise ineligible individuals in the latest round of aid resulting from the American Rescue Plan.

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According to the TIGTA's final audit report issued last week, "the IRS issued more than 1.2 million payments totaling $1.9 billion to potentially ineligible individuals," and blamed the improper payments on "deficiencies TIGTA previously reported based on its review of the IRS’s implementation of the Coronavirus Aid, Relief, and Economic Security Act Economic Impact Payments that the IRS did not address."

So, the IRS knew of problems that resulted in CARES Act funds being wasted, but the IRS didn't address or fix those issues, so more of the same wasteful problems reoccurred when American Rescue Plan benefits were distributed. Classic bureaucracy. 

A table in the audit shows where the improper benefits were distributed, including:

  • 9,592 payments to deceased individuals totaling $13 million
  • 60,824 payments made due to a "programming error" to the tune of $109 million 
  • 342,173 payments sent to nonresidents at a cost of $579 million 

In terms of the payments to individuals who were deceased before the benefits were distributed, TIGTA noted that some of the payments were automatically returned or failed to be processed due to the intended receipient no longer being alive. But more than 18,000 payments totaling more than $25 million were apparently processed for those who were no longer living. 

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The audit notes that "the IRS generally does not have the authority to recover ARPA advance RRC payments that were issued in error." Swell.

Not only did the funds go where they weren't supposed to, the benefits also didn't make it to Americans who were supposed to receive aid from the law. As the audit explains, "TIGTA also identified 644,705 potentially eligible individuals who had not received payments totaling $1.6 billion."

As TIGTA pointed out, similar issues led to criticism of the IRS' distribution of CARES Act benefits. "In May 2021, we reported that some EIPs were sent to potentially ineligible individuals. Specifically, as of July 16, 2020, the IRS had issued more than 4.4 million EIPs totaling nearly $5.5 billion to potentially ineligible individuals." That report on earlier COVID "relief" found that 2,174,616 payments were made to people who were deceased to the tune of $3.5 billion. 

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