IRS Has No Clear 'Legal Basis' to Take Stimulus Checks Back From Inmates

The Internal Revenue Service (IRS) is trying to stop hundreds of thousands of dollars in coronavirus relief payments from reaching prison inmates across the country despite having "no legal basis" for doing so, experts say.

Recently, it came to light that the IRS was asking state officials to help retrieve payments the federal tax agency says were mistakenly sent as part of the rollout of a $2.2 trillion stimulus package approved in March.

The relief measure saw checks of $1,200 sent out to people across the country who had filed income tax returns in 2018 and 2019, including jail and prison inmates.

However, weeks after the funds started to be released, the IRS requested that state corrections departments intercept payments to inmates. The IRS argued that the payments never should have gone to inmates in the first place, with the agency citing the Social Security Act, which prevents incarcerated people from receiving certain benefits, including old age and survivor insurance payments.

While state corrections departments were able to intercept hundreds of thousands of dollars, a significant amount of money is believed to have made it to inmates and now the IRS is demanding those funds back.

Speaking with Newsweek on Thursday, Kelly Erb, a tax attorney who has written about the situation, said that as it stands, there appears to be "no legal basis" for demanding the return of stimulus payments.

"I personally don't see any legal authority for it," she said. If there is a legal basis, Erb said, the IRS has not made it clear.

Newsweek has contacted the IRS for comment. However, asked by The Associated Press for a legal justification, an IRS spokesperson did not appear able or willing to provide one.

"I can't give you the legal basis. All I can tell you is this is the language the Treasury and ourselves have been using," IRS spokesperson Eric Smith said. "It's just the same list as in the Social Security Act."

Erb has said that pointing to the Social Security Act does not provide a legal justification, particularly when there is no apparent language in the coronavirus stimulus bill that appears to restrict inmates' access to relief funds.

She also questioned the IRS' blanket demand that inmates return stimulus funds, particularly when the payments are being branded as "2020 tax credits."

"That means it's being delivered in advance, but they're saying if you're in jail when the checks come then you are not entitled to it. That's at odds with the idea that it's an advance tax credit," Erb said.

Erb wondered: If someone had one week left in prison, for example, when their check came, then would they have to return it, despite it being an advance tax credit?

While Erb said she does not believe there is a legal basis, as far as the IRS has made clear, for the decision to try to claw back stimulus payments from inmates, she sought to make clear that she is not offering an opinion no whether or not inmates should be eligible to receive stimulus payments.

"There are people trotting out the worst case scenarios, like someone who is in jail for 1,000 years and they're saying, 'do you think this guy deserves the check?' It's not about whether or not they deserve the check. It's about what the law says," Erb said.

Kara Gotsch, the director of strategic initiatives at The Sentencing Project, an initiative a Washington, D.C.-based research and advocacy center promoting decarceration, told Newsweek that "legal experts seem to agree that the law does not prevent people who are incarcerated from receiving this stimulus money."

Further, she said she believes incarcerated people should also be able to access support amid the pandemic to help meet their needs during a difficult time.

"Like all Americans, incarcerated people are experiencing the devastating consequences of this pandemic, including its health and financial impact," she said. "Moreover, people in prisons must often pay for their personal cleaning supplies, supplemental food items and other health-related items. This money will contribute to their overall wellbeing," she asserted.

In an interview with The Associated Press, Wanda Bertram, a spokesperson for the Prison Policy Initiative, appeared to agree, saying inmates and their families also need this support particularly as prisons try to release the spread coronavirus by releasing thousands of inmates or by imposing strict lockdowns.

As far as the apparent shift in rules goes, Bertram said: "It appears that the IRS is just making this up."

While the IRS has pointed to an FAQ demanding that checks be returned, Erb said FAQs are "guidance for taxpayers—not law."

The tax attorney said her suspicion was that the IRS likely rolled out the new guidance after facing questions around why inmates were receiving the stimulus funds.

"I think people started questioning who was getting this money in May... and they asked, 'why are these inmates getting this money' and [the IRS] said, 'yeah, they shouldn't'," she said. "I think it was a judgment call, not a legal call."

An inmate reads a book while in the infirmary at Las Colinas Women's Detention Facility in Santee, California on April 22, 2020. The IRS is asking prison inmates to return coronavirus stimulus funds. SANDY HUFFAKER/AFP/Getty