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IRS Responds - Economic Impact Payments Do Not Belong to Nursing Homes or Care Facilities

Client Alert
June 17, 2020

In response to the concerns that some nursing homes and care facilities have been taking patients' economic impact payments (“EIP”) and claiming the EIP belongs to the facility, the IRS issued a reminder that the EIP does not belong to a nursing home or care facility even if that facility receives the individual’s payments, either directly or indirectly. The EIP does not count as income or a resource in determining an individual’s eligibility for Medicaid or other federal programs for a period of 12 months from when the EIP is received. What this means: an individual’s EIP does not have to be turned over by the benefit recipient.

To support the stance that the EIP do not count as income, the IRS stated that the EIP are considered an advance refund for an individual’s 2020 taxes. Therefore, it is considered a tax return for benefit purposes. Further, the IRS points to the instructions for Form 1040 which states, “any refund you receive can't be counted as income when determining if you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. These programs include Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Security Income (SSI), and Supplemental Nutrition Assistance Program (formerly food stamps). In addition, when determining eligibility, the refund can't be counted as a resource for at least 12 months after you receive it.”

The Social Security Administration (“SSA”) released FAQs addressing exactly how the EIP should be handled. The SSA specifically states that the EIP belong to the beneficiary and are not a Social Security or SSI benefit. A representative payee is only responsible for managing Social Security or SSI benefits. Since an EIP is not a Social Security or SSI benefit, the representative payee should discuss the EIP with the beneficiary and allow the beneficiary to determine how it should be used. If the beneficiary determines he/she wants to use it independently, the representative payee should provide the EIP to the beneficiary. If the beneficiary asks the representative payee for assistance in how to use the EIP, the representative payee can provide that assistance outside of his/her representative payee role.

Although SSA does not have the authority to investigate or determine whether the EIP was misused, if SSA receives an allegation that the EIP was not used on behalf of the beneficiary, the SSA may decide to open an investigation into the possible misuse of the beneficiary’s Social Security or SSI benefit payments. The SSA may also remove the representative payee as no longer suitable and appoint a new representative payee.

If you need assistance in determining whether, as a representative payee, the beneficiary’s EIP was handled correctly or suspect that your loved one’s EIP was misused, please contact BMD Tax Law Attorney Tracy Albanese at tlalbanese@bmdllc.com or (330) 253-9195.

IRSEIPEconomic Impact PaymentNursing HomesCare FacilityMedicaidbenefit recipientSSISSATANF
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