IRS Sending Stimulus Check for Unclaimed Recovery Rebate Credit

On January 24, 2025By Littum

Stimulus checks have come and gone for most people along with the pandemic. But strangely, some 1 million taxpayers are receiving extra cash out of the blue from the IRS.

Most of these people filed a 2021 tax return three years ago, but somehow skipped and claimed a much-touted stimulus credit for a lot of money. Most likely they didn’t realize they qualified.

Those who will receive this special payment either left off the Recovery Rebate Credit text line on the 2021 return or entered a $0 when they were actually eligible for the Recovery Rebate Credit.

Now that the money is sent, check your bank account. See your mailbox. Some filers will receive the money via direct deposit, others could receive it with a paper check in the mail. The IRS said it would send letters alerting taxpayers that the money is coming.

The Internal Revenue Service takes a special step to issue the money to these taxpayers after the agency reviewed its internal data, which indicated eligibility.

The recovery rebate credit was the last of three rounds of stimulus payments issued to people by the federal government to bolster the economy after the pandemic.

When will an extra stimulus arrive?

The IRS did not give exact dates for when they would look for the cash. But payments were set to go out automatically in December, according to an IRS statement issued Dec. 20, and most payments were expected to arrive in late January.

Some people who overlooked credit when they filed a tax return three years ago could find that money can be in their bank accounts in a few days. Maybe it’s already there.

Eligible taxpayers in this group do not have to do anything to receive this stimulus money.

The IRS didn’t have a breakdown of how much money might be going to specific states, such as Michigan, according to Luis Garcia, an IRS spokesman in Detroit.

We are undoubtedly talking about a large number of people. After all, it would take more than a dozen large NFL stadiums to seat 1 million people. That’s a lot of people.

But remember that not everyone receives money now. Most people who qualified already received this cash a few years ago. And 1 million taxpayers is really just a tiny fraction of the more than 140 million tax returns the IRS expects to receive for the 2024 tax year by this year’s April 15 deadline.

IRS Commissioner Danny Werfel called the special payments an “example of our Commitment to go the extra mile For taxpayers. “

“Looking at our internal data, we realized that 1 million taxpayers overlooked claiming this complex credit when they were actually eligible,” Werfel said in a statement issued Dec. 20.

“To minimize headaches and get this money to eligible taxpayers, we’re making these payments automatically, meaning these people won’t be required to go through the extensive process of filing an amended return to receive it.”

How much stimulus cash can I receive?

The dollar amount that people want to see varies significantly.

The revaluation discount credit amounted to up to $1,400 per Person when required on 2021 federal tax returns. Or it was up to $2,800 for a married couple filing jointly. The credit also applies to all qualifying persons claimed on a tax return.

A single person without dependents could have received a maximum credit of $1,400.

Married taxpayers who filed a joint return claiming two qualifying dependents on the 2021 return could have qualified for up to $5,600.

But the credit amount could have been reduced based on your income even if you qualified.

Revat rebate credit 2021 includes additional amounts for each qualifying dependent claimed on their return, not just children under 17.

We’re talking up to $1,400 in stimulus money for each qualifying dependent required on the return, including older relatives such as college students, adults with disabilities, parents and grandparents.

The IRS estimated that about $2.4 billion will be distributed as part of this special payment program. That’s an average of $2,400 based on a group of 1 million taxpayers.

Where is stimulus money sent?

The stimulus payment is sent to the bank account listed on Taxpayers’ tax return from 2023 or to the postal address.

Did you end up closing that bank account you had a few years ago? In such cases, the IRS said, the bank will return the payment to the IRS and the refund will be issued to the tax filer’s address in the mail.

What’s with these stimulus checks?

The money being sent now involves the third stimulus or economic impact payments issued after the start of the Covid-19 pandemic in early 2020.

Back in the spring of 2021, the IRS began sending these payments in advance based on information from your 2020 or 2019 tax return. Many people received thousands of dollars in stimulus money for approx. four years ago based on information the IRS had at the time.

Those who didn’t receive money up front or didn’t receive all the money they qualified for could claim recovery discount credit On line 30 of the 1040 for the 2021 tax year. People who qualified and correctly claimed credit on the tax return would have received their stimulus money in 2022, and they would not receive more money now.

You couldn’t double-dip. The IRS subtracted the money you already received directly in advance in 2021 from any credit claimed when you filed a 2021 tax return in 2022.

Unfortunately, tax credits can be confusing and some people just don’t claim them, or they make mistakes and think they don’t qualify for the money.

The third — and final — stimulus payments had another set of complex rules for who qualified based on their income. The 2021 recovery amount dropped to $0 pretty quickly, far faster than previous stimulus programs, based on income.

Singles earning $80,000 or more in adjusted gross income in 2021 could not claim the credit. Married couples earning $160,000 or more also could not claim the credit.

Based on the tougher new income limits, the IRS noted that some individuals were not eligible to claim the 2021 Recovery Recovery Rebate credit even if they received a 2020 stimulus payment.

Who is likely to get stimulus money now?

Let’s rule out who won’t get paid: someone who has already received all the money they were eligible to receive.

And you don’t get a windfall now if you never filed a 2021 tax return. The same is true if you were claimed as a dependent on someone else’s 2021 return, or if you’re a nonresident alien for US tax purposes, as if you are Not a legal permanent resident Or fail the significant attendance test.

Who can now qualify for the special rollout of stimulus money?

Perhaps your income dropped significantly in 2021 from previous years so that your income was within the required income limits for the third stimulus.

Maybe the IRS didn’t send an advance stimulus payment that’s based on your higher income in 2019 or 2020. But you still would have been eligible to claim the recovery rebate credit, based on your 2021 income.

“If the taxpayer saw a drop in their income that year on their next return, they could claim some payment that they otherwise didn’t get in the past, which is the reconciliation process,” said Garrett Watson, senior policy analyst for the Tax Foundation.

Watson said the recovery rebate credit reconciliation process was always in the taxpayer’s favor, meaning they didn’t need to pay back any advances if their income increased in 2021 and they wouldn’t have been eligible otherwise.

“If you qualified for a third payment based on your 2019 or 2020 tax return,” the IRS notes, “the law does not require you to repay all or part of the payment you received based on the information that reported on your 2021 tax return.”

Some parents of toddlers are now seeing the surprise stimulus payment. You may qualify if you had a baby, adopted a child Or had a child placed in your care in 2021.

Or, some college graduates and others may qualify if they could no longer be claimed as someone else’s dependent in 2021 and meet the income limits.

Back in April 2022, I wrote a column about how some people in specific situations who actually qualified for the Recovery Rebate Credit could easily overlook it.

Parents of a child born in 2021, For example, can claim recovery discount credit on their 2021 tax return to receive a stimulus payment for a newborn.

Another underlying at the end of the age spectrum involved college grades. Someone who was claimed on their parent’s return in 2020 but was no longer a dependent in 2021 could investigate whether they would qualify for the Recovery Rebate Credit when they filed their own return in 2022.

As I said, the rules on the 2021 return were confusing. Nothing about this stimulus program was simple.

Of course, the IRS had more than its fair share of headaches with a backlog of amended returns, some of which involved stimulus credits. The IRS still had a backlog of paperwork, including a 1.5 million backlog of unprocessed amended returns at the end of 2022, before transitioning into the 2023 tax season.

Why is the IRS sending stimulus money now?

It is hard to speculate why the IRS decided to take the unusual step of issuing payments to 1 million taxpayers now.

“The change in administrations could have motivated the agency to tie up various loose ends,” Watson said.

In early December, then-President-elect Donald Trump announced that he chose Billy Long, a former Missouri congressman, Taking charge of the IRS.

IRS Commissioner Werfel, who arrived at the IRS in March 2023, had repeatedly stated that he intended to finish his full term through 2027. But Werfel announced his resignation on January 17 before Inauguration Day.

“After considerable introspection and consultation with others, I have determined the best way to support a successful transition is to leave the IRS on January 20, 2025,” Werfel said in his statement.

He noted that Deputy Commissioner Douglas O’Donnell would step in as Acting Commissioner to ensure a smooth transition until a new Commissioner is confirmed.

What if you didn’t file a 2021 return?

News of the special stimulus rollout may have some asking if there is still a way to claim a recovery discount credit.

If you didn’t file a 2021 tax return yet, you still have until April 15 to file a 2021 return to claim the credit and any other refund you may be owed. You cannot file the 2021 return after the 15 April deadline.

The IRS notes that qualified taxpayers who did not file a 2021 return must file a tax return to claim a recovery discount credit, and this is true even if their income from a job, business or other source was minimal or non-existent.

Any rebate credit credit received does not count as income when determining eligibility for federal benefits such as Supplemental Security Income, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families, and the Special Supplemental Nutrition Program for Women, Infants and Children.

Contact Personal Finance columnist Susan Tompor: [email protected]. Follow himr on x @tompor.