The Internal Revenue Service (IRS) has announced plans to distribute unclaimed 2021 tax credits, aiming to assist approximately one million taxpayers who overlooked claiming the Recovery Rebate Credit. This distribution will result in special payments of up to $1,400 being sent to eligible individuals, with funds totaling around $2.4 billion.
The payments will be automatically deposited directly to bank accounts or mailed as paper checks, occurring over the coming weeks. IRS Commissioner Danny Werfel stated, "Looking at our internal data, we realized one million taxpayers overlooked claiming this complex credit when they were actually eligible." This initiative focuses on those who filed their 2021 tax returns but either left the Recovery Rebate Credit field blank or mistakenly marked it as $0.
For many Americans, the Recovery Rebate Credit was part of the federal government’s response to the economic disruptions caused by the COVID-19 pandemic. Taxpayers who missed previous stimulus payments or received less than the full amount qualify for this credit. While most taxpayers eligible for these federal stimulus payments—officially known as Economic Impact Payments—have already received them, this recent identification by the IRS highlights the complexity surrounding the credits.
Eligible taxpayers need not take any proactive steps; payments will be sent automatically, targeting individuals listed on the latest tax returns. The maximum payment available will reach $1,400 per individual. The exact timing for receipt varies but is expected to culminate by late January 2025. The IRS has also indicated it will be sending out notifications to inform these taxpayers about their special payments.
So, what if you haven’t filed your 2021 tax return yet? It’s not too late. To be eligible for the Recovery Rebate Credit, taxpayers need to file their returns and claim the credit by the looming deadline of April 15, 2025, even if they had little or no income during the tax year. This is particularly pertinent for individuals whose financial situation may have drastically changed because of the pandemic.
During the COVID-19 pandemic, there were three substantial rounds of federal stimulus payments, accumulating to over $814 billion. The first round came under the CARES Act, which allowed eligible individuals to receive up to $1,200 per filer and $500 per child. Following this, the Consolidated Appropriations Act distributed $600 per filer and child, and the American Rescue Plan Act rolled out payments of $1,400 per filer and child.
The IRS has crafted resources available online to provide clarity about eligibility and to assist taxpayers with questions surrounding the Recovery Rebate Credit calculation. Potential recipients are urged to review these materials.
For taxpayers who filed their returns but left the Recovery Rebate Credit blank, the IRS is prepared to take action swiftly. These anticipated payments reflect the IRS’s commitment to ensuring all eligible taxpayers receive the benefits to which they are entitled.
Overall, this latest development from the IRS serves as a reminder for taxpayers to stay abreast of their filing requirements and the various tax credits available, particularly those established during national crises like the pandemic.
While the recovery from the turmoil caused by COVID-19 remains challenging, these payments provide much-needed relief for some of those most impacted who may have inadvertently missed claiming funds earlier. The IRS is here to make sure these funds reach those who rightfully deserve them!
