In a significant move, the Internal Revenue Service (IRS) is set to distribute approximately $2.4 billion in special payments to around one million taxpayers who missed out on claiming the Recovery Rebate Credit (RRC) on their 2021 tax returns.
Who Will Receive These Payments?
The recipients are primarily individuals who filed their 2021 tax returns but either left the RRC field blank or entered $0, despite being eligible for the credit. The IRS identified these cases through internal data reviews, recognizing that many taxpayers had inadvertently overlooked this credit. To address this, the IRS is issuing automatic payments without requiring any additional action from the taxpayers. These payments are being disbursed via direct deposit or paper checks, with most recipients expected to receive their funds by late January 2025.
Why Are These Payments Being Issued?
During the COVID-19 pandemic, the U.S. government authorized three rounds of Economic Impact Payments (EIPs) to provide financial relief to Americans. Despite these efforts, some eligible individuals did not receive their payments due to various reasons, such as administrative errors or changes in personal circumstances. To ensure these individuals receive their entitled funds, the IRS introduced the RRC, allowing taxpayers to claim missed EIPs on their tax returns. However, the complexity of the credit led to many eligible taxpayers overlooking it. Recognizing this, the IRS proactively identified these cases and initiated automatic payments to rectify the situation.
What Should Taxpayers Do Now?
Taxpayers who have not yet filed their 2021 tax returns still have the opportunity to claim the RRC. The IRS has set a deadline of April 15, 2025, for filing these returns to receive the credit and any other potential refunds. Even individuals with minimal or no income are encouraged to file to claim their eligible credits.
For those who have already filed and are eligible for the automatic payments, no further action is required. The IRS will send a separate letter notifying recipients of their payment details. If a taxpayer’s bank account has changed since filing their 2023 tax return, the payment will be reissued to the address on record.
This initiative underscores the IRS’s commitment to ensuring that all eligible taxpayers receive the financial support intended for them during the challenging times of the pandemic. By proactively addressing these oversights, the IRS aims to provide timely assistance to those who may have been inadvertently missed in the initial rounds of stimulus payments.
