Hear that? It’s the sounds of the Internal Revenue Service (IRS) trying to retroactively impose rules on stimulus checks being paid out under the CARES Act.

The latest target? Incarcerated persons.

On May 6, 2020, the IRS posted the following FAQ on its website:

Q12. Does someone who is incarcerated qualify for the Payment? (added May 6, 2020)

A12. No. A Payment made to someone who is incarcerated should be returned to the IRS by following the instructions about repayments. A person is incarcerated if he or she is described in one or more of clauses (i) through (v) of Section 202(x)(1)(A) of the Social Security Act (42 U.S.C. § 402(x)(1)(A)(i) through (v)). For a Payment made with respect to a joint return where only one spouse is incarcerated, you only need to return the portion of the Payment made on account of the incarcerated spouse. This amount will be $1,200 unless adjusted gross income exceeded $150,000.

There’s just one problem: there is no such limitation in the CARES Act. And, as noted with respect to decedents (posted yesterday), there’s no direction about what to do if those checks have already been cashed (or worse, spent). Keep in mind that as of today, Treasury says that more than half of all payments have been delivered… And yet, these rules were just posted today.

To be clear, there are some instances where Congress intended to keep those who are incarcerated from benefiting from relief. For example, at CFR §120.110 (Code of Federal Regulations), businesses with “an Associate who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude” are ineligible for applying for Small Business Administration (SBA) loans. And that’s real authority: the CFR is the codification of the general and permanent rules and regulations published in the Federal Register.

In contrast, this is an FAQ on the IRS website. Keep in mind that if an FAQ is not published in the Internal Revenue Bulletin, the IRS may change its position at any time. The IRS has made clear that FAQs “and other items posted on IRS.gov that have not been published in the Internal Revenue Bulletin are not legal authority . . . and should not be used to sustain a position unless the items (e.g., FAQs) explicitly indicate otherwise or the IRS indicates otherwise by press release or by notice or announcement published in the Bulletin.”

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Author

Kelly Erb is a tax attorney, tax writer and podcaster.

12 Comments

    • Kelly Reply

      This is tricky. I think the IRS is wrong in their interpretation of whether incarcerated folks are eligible for a check. The problem is that if that’s their position, asking them for help (even if they were answering the phone) isn’t going to work. I think your best bet is to return the check and then claim the credit on your 2020 return.

  1. Kelly, thanks for your post. Just read the Times article that came out today as well. Why wouldn’t you take this case on behalf of incarcerated people who desperately need your help? Seems like a pretty straightforward class action, especially since the IRS has conceded that they “can’t give [the public] a legal basis” for withholding the stimulus checks from people who are incarcerated. I’m sure that a number of national civil rights litigation shops would be happy to co-counsel the case with you or other experienced tax attorneys. – Arjun

    • Kelly Reply

      Unfortunately, I’m not a litigator. I wouldn’t even want to co-chair a mass litigation.

  2. Shelly Kimber Reply

    My son is incarcerated he filed a 2018 tax return but he has since been incarcerated
    I filed a non-filers on him for his stimulus and they said they were going to send it but they have not

    • Did you check to see if it was intercepted? Some prisons are doing that (wrongly, I believe).

  3. KATHLEEN Capps Reply

    MY FIANCEE IS CURRENTLY INCARCERATED BUT IS DUE TO BE RELEASED HOME AFTER 3.5 YEARS. PRIOR TO GOING TO PRISON HE WORKED EVERYDAY AND YES HE MADE A HUGE MISTAKE AND NOW HE’S PAYING THE CONSEQUENCES , BUT THE CRIME HE COMMITTED DOES NOT MAKE HIM A BAD MAN, IT DOESN’T DEFINE HIM FOR THE REST OF HIS LIFE. I THINK IT WAS VERY WRONG NOT PROVIDING INCARCERATED PEOPLE THEIR STIMULUS CHECK TOO. THEY ARE HUMANS AND I THINK AS LONG AS THEY FALL UNDER THE SAME REQUIREMENTS AS THE REST OF AMERICANS THEN THEY SHOULD ALSO BE GIVEN THEIR PAYMENTS TOO. NOW FOR INMATES SERVING A LIFE SENTENCE IT WOULD BE DIFFERENT, BUT THEY SHOULD HOLD INMATES CHECKS UNTIL THE TIME THEY ARE SCHEDULED FOR RELEASE, AND LORD KNOWS THAT MONEY WOULD BE A CRIMINALS WAY OF ACTUALLY STARTING OFF INTO A NEW WAY OF LIFE REDEEMED.

    I APPLIED FOR MY FIANCEE IN APRIL AND IT SAYS NO INFORMATION STILL NOW WHEN I GO CHECK TO SEE IF MAYBE THEY APPROVED IT, BUT ANYWAYS I WISH I COULD MAKE MY VOICE KNOWN ON THIS SUBJECT.SO I AM STILL A BIT CONFUSED ON THIS HEROES STIMULUS RELIEF PACKAGE COMING HOPEFULLY SOON… IS THE GOVERNMENT PLANNING TO EXCLUDE INCARCERATED AMERICANS AGAIN WITH THIS BILL TOO?

    IF A WIFE AND HUSBAND HAVE A HOUSE AND 3 KIDS AND THE DAD GETS SENTENCED TO PRISON FOR 2 YEARS, WOULDN’T YOU THINK THIS WIFE WOULD REALLY BE NEEDING HER HUSBANDS PORTION OF THEIR STIMULUS CHECK EVEN WAY WAY MORE NOW BECAUSE HER HUSBAND ISN’T GOING TO BE AROUND TO HELP PAY FOR ALL OF THEIR FAMILIES LIVING EXPENSES.

    I WISH THE GOVERNMENT WOULD RE-THINK ON THIS TOPIC AND MAKE SOME NECESSARY CHANGES AND PROVIDE ALL AMERICAN PERSONS WHAT WE ARE ALL EQUALLY OWED, DESERVED AND NEED DURING A PANDEMIC LIKE THIS CORONA VIRUS!
    #NO1PERSONISBETTERTHANTHENEXT
    #WEAREALLGODSCHILDREN

    • Leticia Jones Reply

      My husband is in prison. I immediately returned his part of the stimulus check. I understand where you are coming from but inmates don’t deserve that money. There are many law abiding citizens out here in the free world that are not receiving stimulus checks. These people have lived their entire lives obeying the law. Those incarcerated had a choice not to break the law. They should have considered their families before breaking the law.

  4. Kandice hainey Reply

    I think incarsarated people should not receive a stimulus check and there should be punishment if they cash and keep it

  5. Nancy Chamblin Reply

    My husband has been in jail since 12_26 2019 some illegal signed him up for the stimulus they even spelled his last name wrong what do I do

    • I’m not quite sure what you mean… Someone registered him as a non-filer? If that’s the case, the IRS will likely take the check. No matter, there shouldn’t be any real fallout.

  6. Stephanie Carr Reply

    Bottom line, it’s not against ANY LAW for a prisoner to receive a stimulus check.
    Who do you think is actually going to be responsible for that money? Their families, that’s who.
    My son costs me a lot of money in jail. Commissary, phone calls, underwear, sweatshirts, shorts, shoes, soap, deodorant etc.
    THE JAIL DOES NOT PROVIDE ALL THIS STUFF!!!! TOILET PAPER FOR GOODNESS SAKE!!!
    I filed for my son, having power of attorney, and if someone else does anything with his check, I believe they should be prosecuted for tampering with federal mail.
    The IRS can ask for it back, legally, they cannot make ANY PRISONER RETURN IT.

    ANY PRISONER WHO HAD THEIR CHECK SENT BACK, SHOULD CONTACT AN ATTORNEY ASAP.

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