IRS to Issue $2.4 Billion in Overlooked Stimulus Payments to Over One Million Taxpayers
The Internal Revenue Service (IRS) has announced that it will be distributing approximately $2.4 billion in overlooked stimulus payments to more than one million taxpayers who failed to claim the Recovery Rebate Credit (RRC) on their 2021 tax returns. This initiative aims to rectify an oversight concerning the RRC, a provision of the American Rescue Plan Act of 2021 designed to provide financial relief during the pandemic. The IRS identified these eligible individuals through internal data analysis and will automatically issue payments by direct deposit or check, with a separate letter notification. This proactive measure eliminates the need for taxpayers to file amended returns, simplifying the process and ensuring timely receipt of these funds.
The American Rescue Plan Act, enacted in March 2021, authorized Economic Impact Payments (EIPs), also known as stimulus payments, to eligible individuals and families. These payments, totaling up to $1,400 per individual and $2,800 for married couples filing jointly, also included an additional $1,400 for each qualifying dependent, regardless of age. The RRC was designed to provide a catch-up payment for those who didn’t receive the full amount they were entitled to through the advance EIP payments distributed throughout 2021. These advance payments were based on 2020 tax information, and the RRC allowed individuals whose circumstances changed in 2021 (such as a decrease in income or the addition of a dependent) to claim the difference. The credit was subject to income limitations, phasing out for individuals with adjusted gross incomes above $75,000 and married couples filing jointly above $150,000.
The IRS initiated the third round of EIP payments in March 2021, continuing through December of that year. However, many taxpayers, even those who filed their 2021 tax returns, either left the RRC field blank or entered $0, effectively forgoing the credit they were due. The IRS initially indicated that it would not automatically calculate the RRC or correct these omissions. However, recognizing the potential financial hardship for these individuals, the agency reconsidered its position. The recent announcement reflects the IRS’s commitment to ensuring that all eligible taxpayers receive the financial assistance intended by the American Rescue Plan Act.
Eligible taxpayers who filed a 2021 tax return but did not claim the RRC will receive their payments automatically by late January 2025. The IRS will distribute the payments through direct deposit or by check, according to the information provided on the taxpayer’s 2023 tax return. A notification letter will also be sent to each recipient, informing them of the payment and its purpose. If a taxpayer’s bank account information has changed since filing their 2023 return, the IRS will reissue the payment via check to the address on record.
This initiative is part of the IRS’s ongoing efforts to improve its services and assist taxpayers. Commissioner Danny Werfel emphasized the agency’s commitment to going the extra mile for taxpayers, highlighting these automatic payments as a prime example. By taking this proactive approach, the IRS aims to alleviate the burden on taxpayers and ensure that they receive the funds they are rightfully owed without the complexities of filing amended returns. This move is especially beneficial for those who may be less familiar with tax procedures or who may not have realized they were eligible for the credit.
While the automatic payments are limited to those who filed their 2021 tax returns, individuals who did not file and believe they may be eligible for the RRC still have an opportunity to claim the credit. The deadline to file a 2021 tax return and claim the RRC is April 15, 2025. It’s crucial for these individuals to act before the deadline to receive any refund they are due, including the RRC. This provision offers a second chance for those who may have missed the initial opportunity to claim the credit. The RRC is non-taxable income and will not affect eligibility for federal benefits such as SSI, SNAP, TANF, or WIC. Generally, a valid Social Security number (SSN) is required to claim the credit, though there are specific exceptions for members of the U.S. Armed Forces and certain situations involving joint filers. Failing to file a 2021 tax return by the April 15, 2025 deadline will result in forfeiture of the RRC and any other potential refunds.
