The IRS is set to distribute approximately $1.4 billion to about one million taxpayers who failed to claim their Recovery Rebate Credits on their 2021 tax returns, as announced by IRS Commissioner Danny Werfel. These payments, which will reach eligible taxpayers automatically, aim to alleviate the confusion surrounding the complex credit system introduced during the COVID-19 pandemic.
During the pandemic, three rounds of Economic Impact Payments (EIPs), colloquially known as stimulus checks, were implemented to assist individuals and families facing financial hardships. The first check, which was disbursed early in 2020, provided up to $1,200 per eligible individual. The second payment of up to $600 followed suit early in 2021, and finally, the third round offered up to $1,400 per individual later in 2021. While most taxpayers received these payments, many eligible individuals did not claim their third stimulus check.
According to the IRS, many taxpayers who filed their 2021 tax returns did not properly claim the Recovery Rebate Credit. Specifically, this includes instances where individuals either left the credit application field blank or reported it as $0, even though they were eligible. "Looking at our internal data, we realized one million taxpayers overlooked claiming this complex credit when they were actually eligible,” said Werfel.
This automated payment process, which is scheduled to start rolling out in December and conclude by late January 2025, ensures these individuals will not have to endure the hassle of amending their tax returns to access funds rightfully theirs. Payments will be sent either by direct deposit to the bank account provided on the taxpayer’s most recent tax return or through paper checks sent to their registered address. According to the IRS, affected taxpayers will also receive notification letters to inform them of their eligibility for these payments.
“To minimize headaches and get this money to eligible taxpayers, we’re making these payments automatic,” Werfel emphasized. Currently, the IRS has estimated the total underdistribution to be around $2.4 billion, which signifies the scale of this oversight affecting one million participants. The agency aims to mitigate any delays and provide recipients with access to these necessary funds.
For those who have not yet filed their 2021 tax returns, there remains the possibility of receiving the payments. The IRS guides such individuals to submit their tax returns by April 15, 2025, to claim the Recovery Rebate Credit. This deadline means eligible taxpayers still have time to receive what they might have normally missed, ensuring they are rewarded for their compliance with filing requirements.
Historically, the three pandemic-related EIPs amounted to approximately $814 billion distributed to American households. Taxpayers were deemed eligible based on individual income, tax filing status, and the number of qualifying dependents when these stimulus checks were calculated. Each payment's amount was intended to deliver significant immediate financial relief during times of heightened economic uncertainty.
Through this newly streamlined process, the IRS is demonstrating its commitment to ensuring deserving taxpayers receive - albeit tardily - the funds they are entitled to. This initiative not only aims to support financially affected households but also seeks to improve public trust and engagement with the IRS moving forward.
Taxpayers eligible for the Recovery Rebate Credit who missed claiming their payments now have the opportunity to receive their checks without additional red tape. The IRS remains focused on assisting all eligible individuals, emphasizing accessibility and user-friendly processes to labor through the tax and benefits system.
