The IRS has begun mailing automatic “special payments” of up to $1,400 to nearly one million taxpayers this month. It is intended for eligible individuals who missed claiming the 2021 Recovery Rebate Credit on their tax returns.
About the Recovery Rebate Credit
The Recovery Rebate Credit, initiated during the COVID-19 pandemic, was a refundable tax credit for those who did not receive the full amount of economic impact payments, known as stimulus checks. Americans were issued three stimulus payments: $1,200 and $600 during the Trump administration in 2020, and subsequently $1,400 under the Biden administration in 2021.
Although the majority of eligible individuals received these payments, those who did not could still claim the credit on their 2021 tax returns.
This is estimated to be roughly one million taxpayers, to whom the IRS issued these automatic payments.
Automatic Payments: No Action Required
IRS Commissioner Danny Werfel said, “Looking at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were eligible. 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.”
Payments will be made directly to eligible individuals through direct deposit or by paper check, depending on the bank account or mailing address on file with the IRS. Those whose accounts have been rendered inactive will get a paper check at the registered address. Payments should be effected by late January.
Thirdly, in this program, the recipient will get a notification letter, showing a payment to the recipient by the IRS. The agency intends to ensure taxpayers receive the benefits they are eligible for with minimal administrative hassle.
To Whom Does This Amount Belong?
This payment is intended for tax filers who filed their 2021 tax return but failed to fill out the Recovery Rebate Credit section, or worse, entered an incorrect amount of $0, though eligible.
The Recovery Rebate Credit does not form part of taxpayers’ taxable income, and the eligibility of no taxpayer will be affected by the credit. None of the federal assistance programs like Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), or Temporary Assistance for Needy Families (TANF) will be affected. Although still possible to claim the credit for 2021, there are situations where the taxpayers will need to file their returns to have a chance of getting some kind of refund or payment for the credit if it hasn’t been filed yet and this is before April 15, 2025.
A Broader Impact
The IRS projects it will make a total of nearly $2.4 billion in payments and could bring needed relief to many taxpayers, further highlighting the agency’s effort in seeing to it that qualified persons receive their just benefits.
Tax experts advise taxpayers to check their 2021 returns if they believe that they failed to claim their Recovery Rebate Credit. Filing the return correctly will help them avoid any non-compliance and save them a fortune.
Future Prospects
This automatic payment initiative forms part of the larger endeavors made by the IRS toward improvement in taxpayer services, aiming to make processes more efficient. Some examples include new updates such as a higher 401(k) contribution limit for 2025, besides new tax regulations that are being created to make tax compliance more seamless, yet offering higher financial security to Americans.
This development gives those taxpayers who either missed out on the first stimulus checks or did not claim their Recovery Rebate Credit another chance to benefit from the payments. The IRS also releases comprehensive information regarding eligibility and instructions on claiming the credit via its website.
The IRS has taken proactive steps to rectify missed claims by simplifying the payment process and extending the filing deadline, all of which will help millions of Americans.
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