The IRS and state labor departments are telling millions of Americans to repay stimulus checks and unemployment benefits. The benefits distributed during the coronavirus pandemic prevented millions of families from reaching their financial brink. That hasn’t stopped state and federal agencies from reclaiming funds paid out in 2020. For many, the biggest issue is that repayment demands have not been validated.
Here’s a look at who’s been asked to repay stimulus checks or unemployment benefits.
IRS demands repayment of stimulus checks
Last month the IRS sent out letters to thousands of Americans demanding stimulus checks be paid back. Some of the letters were for $600, but others were asked to pay back as much as $2,400. In many cases the IRS claimed that people were wrongly paid twice. Others that a second check was sent to a separate address. However, a majority of people did not receive a second payment — and financial institutions have backed them up on it.
Margaret DeLaney, one of those taxpayers, reached out to FingerLakes1.com to share her story after recent reporting highlighted similar cases. “This is obviously a systemic issue,” DeLaney explained. “And the response has been inadequate at best.” She considers herself one of the fortunate ones, because the IRS told her to disregard the letter due to a ‘technical error’. “The representative on the phone told me that they aren’t actually able to do anything about errors in audit letters that the IRS sends out. But she was able to confirm that the letter I received was in error.”
Both DeLaney and her father received the same letter — indicating that $1,400 was owed back to the IRS due to overpayment. When she called on behalf of her father, who is 86-years-old, the encounter wasn’t as positive. “We received our letters about a week apart, but when I called on his behalf, since he could not — the representative was much less responsive,” she recalled. “They told me there was nothing they could do and that was it.”
Taxpayers feel like there aren’t any good answers
The IRS says that audit letters requesting further information can be addressed by sending along the documents. They can be deposited digitally or sometimes resolved over the phone. In most cases, though, sending the documents — or copies — through the mail is the most-effective way to get it resolved.
As for repayment requests on stimulus checks — the resolution is more complex. The IRS is instructing taxpayers to not call if they received one of these letters — and instead, pay the bill with the goal being to recoup the money on next year’s tax return. However, that’s proven to be an extra burden on families who cannot afford to repay stimulus checks, or would not have to file taxes normally next year.
State labor departments demand unemployment money back
Thousands of Americans who received unemployment benefits during the coronavirus pandemic have been seeing letters demanding repayment of those funds. The money, which was vitally extended and enhanced through the CARES Act and American Rescue Plan, was intended to help millions of struggling families. Now a new headache has been born out of the issue — as residents in states like Missouri, New York, and others are contacted for repayment.
“They want me to repay $900 for the state benefits, that was $67 weekly, and the Federal Pandemic Unemployment Compensation of $3,600, the $300 a week,” Brandel Cook, a Missouri resident told Insider. While that amount is relatively small — thousands of others are being told to repay massive amounts in unemployment benefits — even though residents followed all the rules associated with applying for them.
In New York it was a problem associated with a decades-old unemployment system used by the Department of Labor. Millions of dollars was earmarked to fix the technical issues, but that hasn’t stopped state agencies from coming back attempting to reclaim funds there either.
In April, the Cuomo Administration hid behind federal law — pointing out that the state Department of Labor is required to recover any overpaid funds. However, that didn’t sit well with New Yorkers as the Governor issued executive orders circumventing all sorts of laws during the pandemic.
Feeling the weight of unemployment collection
“It feels like the state has pandered quite a bit to those who want to see systemic change,” said Ellen Lukas, a Westchester resident. She received a letter from the Department of Labor indicating that she owed unemployment money. As was the case with many others, a phone call resolved the issue. “I called them, and it very quickly became clear that it was a lack of resources, or the system just going crazy.” When Lukas was finally able to get through — the representative told her it was a technical error. “If I couldn’t get it resolved over the phone I’m not sure what I would’ve done.”
That’s the challenge. Despite federal and state efforts to help people — the systems utilized were outdated and wrought with technical issues. Instead of changing policy to allow a longer evaluation period of those errors — the agencies have swarmed to collect.
“What are people supposed to do?” Lukas asked. “The letter said I had 60 days to respond. Some of my friends who’ve received similar letters had less than 30 days. There has to be an easier way.”
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