4 Reasons the IRS May Ask for a Refund

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The error is human.

Key points

  • If the IRS sent a stimulus check that was not due to you, it may ask you to return the funds.
  • If the IRS has its facts wrong, you have the right to dispute the claim.
  • As long as you are honest with the agency, it can be surprisingly easy to work with the IRS.

Generally, the IRS has three years to audit our tax returns. If the tax administration finds a substantial error, it can add additional years. While the odds of an audit remain low, if you find yourself audited and the IRS requests the return of stimulus funds, here are four likely reasons why it happened.

1. You made too much money

Each of the three stimulus checks was tied to an income threshold. Once that threshold was reached, the amount of their stimulus check was reduced. Considering the millions of checks that have been deposited in Bank accounts and mailed to your home, it’s natural to assume the IRS made mistakes by mailing a check (or two) to someone who made too much money to be eligible for payment.

One thing to keep in mind: Crooks are sure to jump on the stimuli bandwagon by posing as IRS agents. Their goal is to obtain personal information, such as your social security number, home address, and banking information. The IRS will never contact you by phone, text, or email except in response to a message you sent. If the IRS needs to contact you, you will receive an old-fashioned letter (to the address listed on your last tax return).

2. You received money for someone who died

With over a million Americans dead from COVID-19, it’s only natural that the IRS didn’t record all of the deaths when it sent out the first check. Let’s say your spouse died in 2019 and you hadn’t filed a 2020 tax return by the time the IRS started sending checks in April 2020. Because the IRS didn’t realize your spouse had died, the check that was sent included the $1,200 your spouse would have been entitled to if he were alive.

While it’s doubtful the IRS will go after anyone whose loved one died before 2020it is good to know that he could occur.

3. You are a non-resident alien

People registered as resident aliens were eligible for all three stimulus checks. If you are a nonresident alien who received a check, the money must be returned to the IRS. If you haven’t already, this is a problem the IRS can easily spot during a basic audit.

So many millions of checks were sent that it is possible that some people received more than one payment for the same round. Let’s say you were expecting a stimulus payment of $1,200 but noticed two deposits of $1,200 into your bank account. One of them is due to the IRS.

What to do if the letter appears in your mailbox

As mentioned, you will receive a letter from the IRS if it detects a problem with a previous tax return.

Read the letter carefully. If it appears that the IRS got its facts wrong, dispute the case. If it is clear that the letter from the IRS is correct, refund the money by writing a check or money order to the US Treasury for the amount owed. Include your social security number or tax identification number and a note explaining why you are returning the funds.

If you receive a notification letter, don’t panic. The IRS is surprisingly easy to deal with as long as you are honest with them. If you don’t have the requested funds, you can usually make a payment arrangement.

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