The Internal Revenue Service (IRS) has mistakenly identified over 6,800 living individuals as deceased, obstructing thousands of taxpayers from filing their tax returns and receiving refunds. A report by the Treasury Inspector General for Tax Administration revealed the errors, which occurred as the IRS locked accounts that were believed to belong to deceased individuals in order to prevent identity theft and fraud. However, 71% of the accounts flagged as deceased were actually alive. The issue was brought to light after a taxpayer was unable to receive their stimulus checks due to being marked as deceased.
The 6,821 erroneously locked accounts were part of a larger group of 9,646 accounts that received notices from the IRS stating that the primary or secondary taxpayer was deceased and therefore unable to process the tax return. These accounts were flagged as questionable because the Social Security Administration, the primary agency responsible for tracking death information, did not have a death date for them. Overall, 71% of the accounts that received these notices were incorrectly locked.
To resolve the error, individuals who received the notice must contact the Social Security Administration and provide written requests, along with supporting documents such as the original IRS notice, a tax return, and proof of identity. However, this process places a burden on taxpayers and increases the workload for the IRS.
The IRS acknowledged that the accounts were improperly locked due to both human and computer programming issues when identifying the appropriate taxpayer accounts. The agency is currently reviewing recently locked accounts and investigating the underlying causes of the problem to inform future actions and training.
In recent years, the IRS has faced challenges in ensuring that correct payments are made to the right individuals, including living beneficiaries. In 2021, it was reported that the IRS sent approximately 4.5 million payments to people who were ineligible, including payments to deceased individuals.
The IRS primarily receives death information from the Social Security Administration, but it can also tag individuals as deceased through its own collection activities or when processing a final tax return that includes a death date. To address the issue highlighted by the report, the IRS has implemented a new method to reconcile death date information annually with the Social Security Administration. This includes cross-referencing its records with the comprehensive file of death data received in June.
The report from the Treasury Inspector General for Tax Administration made several recommendations, most of which the IRS agreed with. However, the IRS disagreed with the recommendation to update the notice it sends to taxpayers, claiming that the majority of notices are sent when taxpayer accounts are appropriately locked. The IRS states that it already provides information on what to do if an account has been locked in error and encourages taxpayers to contact them for assistance.
The concerns surrounding the accuracy of death data are not limited to the IRS, as policymakers and government officials have been deliberating over who in the federal government should collect and share death information with other agencies. Currently, this responsibility falls on the Social Security Administration.
