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When Congress rushed to flood the US economy with stimulus money during the pandemic, it prioritized speed over accuracy. That decision led the U.S. Treasury Department to erroneously send more than $1 billion in economic impact payments to the dead and to citizens of other countries who are ineligible for the money.
Now the IRS is trying to get some of those stimulus checks back, causing legal chaos abroad — even as it repeats the mistake that caused the problem.
In the western Pacific islands of Micronesia, dozens of customers have sued the Bank of Guam for illegally confiscating incentive deposits totaling more than $400,000 and, in some cases, returning them to the IRS.
One of those clients is Craig Reffner, an attorney who moved from the United States to Micronesia about 25 years ago, but has retained his U.S. citizenship and filed U.S. taxes, making him eligible for the incentive money.
When Reffner’s first check, for $1,200, arrived in the spring of 2020, he deposited it into his account with the Bank of Guam. When his second check, for $600, arrived earlier this year, he did the same, but the bank blocked the payment.
“That night I was online and I looked at my account and I noticed there was a huge negative transaction,” Reffner recalls, “and I thought, ‘What in the world could have happened?’ “
What happened is that the Bank of Guam received a letter from the US Treasury Department asking for help in recovering tax payments that the IRS had incorrectly issued. The bank eventually gave Reffner and others their money back, but some customers never saw their stimulus checks back because the bank sent the payments back to the IRS.
Cody Spence, another customer of the Bank of Guam in Micronesia who is eligible for the money, said that when his first check arrived, the bank asked for his passport before releasing it. And he said two Micronesian police officers arrived at his workplace last month and questioned him about the stimulus money he and his family were receiving — three rounds totaling more than $7,000.
Those experiences made him feel “uncomfortable,” said Spence, a U.S. citizen and a U.S. military veteran, “since it was a foreign government questioning me about how I received my money from my government.”
Reffner told NPR that the Bank of Guam asked some customers for copies of their tax returns to determine eligibility for incentives, and began seizing any form of payment issued by the U.S. Treasury, including Social Security checks and veteran benefits. A Micronesian citizen, Dion Bernard Asher, told NPR the bank was temporarily withholding a $1,200 salary she received for providing translation services to the US Department of Justice.
The Bank of Guam said it would not comment on the lawsuits in Micronesia as the matter is in court. But in court files and emails reviewed by NPR, bank officials said some customers received incentives for which they were ineligible and that the bank is required by US law to return the money. The bank’s clients claim that the IRS has no legal jurisdiction over the bank.
Enda Kelleher, a vice president at Sprintax, which does U.S. tax preparation for non-residents, said it is not the role or expertise of a foreign bank to determine whether economic-impact payments were made correctly.
“Hats off to the Bank of Guam if they can suddenly retrain their entire team to be non-resident tax experts, but I don’t think they’re in that field,” Kelleher said. “And I don’t think it would be appropriate for them to go through individuals’ tax returns and determine their residency and determine if they qualify for a treaty and if they qualify for the stimulus check.”
He added, “They have to be very, very careful before taking that route.”
Only US citizens and US “resident aliens” are eligible for incentive money. The term “resident alien” is a federal tax classification and to qualify, a person needs a green card or must have been in the US for a certain amount of time.
But the IRS has acknowledged that it erroneously sent checks to many non-citizens who did not qualify. That includes non-Americans who receive Social Security and other federal benefits, but who are ineligible for incentives because they are not citizens or “resident aliens.”
The IRS has also acknowledged that they have falsely sent incentive money to many foreign immigrant workers who, unintentionally or on purpose, have filed an incorrect tax return form that makes it appear as if they are living in the US.
Kelleher said his company has thousands of customers from about 150 countries who have falsely received stimulus checks and are now trying to return the money to the IRS. For most of them, that requires filing an amended tax return.
An increasing number of customers filing amended returns — at Sprintax, 20 times more than in a typical year — indicate misdirected stimulus money “remains a problem and continues to cause confusion,” Kelleher said.
Meanwhile, the IRS is still repeating the mistake that led to the lawsuits in Micronesia.
Susanne Wigforss is a Swedish citizen residing in Stockholm who has received two rounds of stimulus totaling $1,800, although she is not eligible, and she recently received a letter from the United States Treasury informing her that a third round is in progress. comes, for $1,400.
Wigforss worked in California years ago, which makes her eligible for Social Security, but not the incentive money. Her first two checks were signed by Donald Trump, and after the media reported the error, she assumed the IRS would fix the problem — until she got her third report.
“When the mail came and I saw that there was a letter from… [the] IRS, I said out loud, ‘They can’t possibly do this again!'” Wigforss recalls. “But when I opened the letter, there it was, signed by Joseph Biden, White House, that another check is on the way . I was amazed.”
For Craig Reffner, the American citizen in Micronesia whose stimulus check was withheld for weeks by the Bank of Guam, it is absurd that the United States continues to wrongly issue incentives while trying to get back the wrongly issued incentives.
“I don’t understand why President Biden would even allow the IRS to continue operating and making mistake after mistake after mistake,” he said. “I mean, that’s just a ridiculous way of working.”
An IRS spokeswoman, Sarah Maxwell, said she was not aware of the Bank of Guam’s lawsuits or the letter from the IRS asking for help from the bank, and she did not say how many other banks would have a similar letter. receive.
But she said the IRS is working with financial institutions around the world to investigate suspicious tax activity, and the IRS continues to ask people who have falsely received incentive checks to voluntarily return them.