Don't Mess With Taxes

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The Internal Revenue Service is sending out holiday gifts this month to around a million people. The recipients are people who were eligible for, but did not claim, the 2021 Recovery Rebate Credit (RRC).

By the end of next month, they should have the funds in hand, or directly deposited into their bank accounts.

The maximum RRC amount is $1,400 per person, but the exact amount will depend on the individuals’ specific circumstances, such as income, filing status, and number of dependents.

Overall, the IRS says it will be delivering about $2.4 billion to the eligible recipients. That’s also this weekend’s By the Numbers figure.

Overlooked EIPs in 2021: The money, officially known as Economic Impact Payments (EIP) but popularly known as stimulus payments, was part of the American Rescue Plan enacted in March 2021. The federal effort was a way to help those who suffered financially because of COVID-19 pandemic work hour reductions or total job losses.

For the most part, the money was sent out automatically by the IRS to eligible individuals based on information in the agency’s database.

So, during the height of the coronavirus pandemic, most eligible taxpayers received their EIPs directly or claimed the RRC when they filed tax returns.

But, as a recent IRS internal review revealed, not all.

The IRS examination of its records found that around one million eligible taxpayers who did not automatically get an EIP also did not claim the tax credit. While they filed a 2021 tax return, they left the data field for the Recovery Rebate Credit blank or filled out that section as $0 when they actually qualified for the credit.

This December EIP mailing will correct that oversight.

Automatic EIP payments: As with the original stimulus payments, eligible taxpayers don’t have to take any action.

“To minimize headaches and get this money to eligible taxpayers, we’re making these payments automatic, meaning these people will not be required to go through the extensive process of filing an amended return to receive it,” said IRS Commissioner Danny Werfel.

The IRS will send those who it discovered are due the money automatically this month. The money should arrive in most cases by late January 2025.

Where the IRS has taxpayer financial institution data, the payments will be directly deposited into those accounts. Specifically, the IRS will use the bank account listed on the taxpayer’s 2023 tax return.

If you’ve closed the account since your 2023 tax return, don’t panic. The IRS says the bank will return the payment to the IRS, and the refund will be reissued to the filer's address of record, again from that 2023 return.

That filing’s taxpayer address also will be used in cases where the stimulus payment must be mailed as a paper check.

Regardless of how the payments are delivered, the eligible taxpayers who will be getting the money also will receive a separate letter notifying them of the upcoming payment.

Nonfilers still have a chance for an EIP: If you didn’t file a 2021 tax return and believe you qualify for coronavirus stimulus money, you still have a chance to claim it.

You need to file that 2021 tax return by April 15, 2025. There you can claim the RRC and any other tax breaks for which you might qualify.

If you have an IRS Online Account, you can check it to see if you got any EIPs.

You also can find more information on the payments at the IRS frequently asked questions pages 2021 Recovery Rebate Credit — Topic G: Finding the Third Economic Impact Payment Amount to Calculate the 2021 Recovery Rebate Credit and 2021 Recovery Rebate Credit — Topic A: General Information.

You also might find these items of interest:

• The Truth About Paying Fewer Taxes: Truth #9 – Why Credits Are Better
• IRS elaborates on delivery of $1,400 COVID relief payments (March 13, 2021)
• Third-party consolidated claim process for Covid-related ERC extended to Dec. 31

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