In the coming weeks, approximately 1 million taxpayers will automatically receive special payments of up to $1,400 from the Internal Revenue Service (IRS), an initiative designed to assist those who failed to claim the Recovery Rebate Credit on their 2021 tax returns. The IRS has allocated about $2.4 billion for this distribution, which will benefit taxpayers who either missed a Covid stimulus payment or did not receive the full amount. This credit was available for those who were eligible for the federal stimulus payments, officially known as Economic Impact Payments, but failed to claim it when filing their tax returns. The IRS recently discovered that many taxpayers, although eligible for the credit, overlooked or failed to claim it on their 2021 tax filings.
The payments, which will be automatically sent by the IRS, are either going to be directly deposited into the bank accounts of eligible individuals or mailed as paper checks, depending on the payment preferences on file with the IRS. The special payments are expected to provide much-needed financial support to those who missed out on previous stimulus payments, including individuals and families who may have experienced financial hardships during the pandemic. The maximum payment individuals can receive will be $1,400 per person, but the total amount of the payment will vary based on individual circumstances.
As for the question of who will receive a check, the chances for most taxpayers are slim, as most eligible recipients for the Economic Impact Payments (stimulus payments) have already received them. The payments being issued now are aimed specifically at those who filed a 2021 tax return but either left the Recovery Rebate Credit field blank or entered $0 when they were actually eligible for the credit. This issue was discovered by the IRS after reviewing 2021 tax returns and identifying those individuals who may have missed the opportunity to claim the credit when filing their taxes.
Importantly, eligible taxpayers do not need to take any action. The IRS will automatically distribute the special payments this month, with funds expected to be deposited or checks arriving by late January 2025. Payments will be sent to the bank account listed on the taxpayer’s 2023 return or to the address that the IRS has on file. This automatic distribution means that taxpayers don’t need to refile or request the credit, as the IRS will handle the entire process.
Taxpayers who are eligible for the special payment will receive a payment that is determined based on the credit they should have claimed when they filed their 2021 tax return. The IRS has posted detailed guidance online about how these payments are being calculated and what qualifies taxpayers for the Recovery Rebate Credit. In addition to these payments, eligible taxpayers will also receive separate letters from the IRS notifying them of the special payment and outlining the details of the distribution.
For those who have not yet filed their 2021 tax returns, there is still an opportunity to receive the Recovery Rebate Credit. Taxpayers can still file a return and claim the credit as long as they do so by the extended deadline of April 15, 2025. This is important even for individuals with minimal or no income during the 2021 tax year, as they may still be eligible for the credit if they meet other criteria such as being a dependent or having children.
It’s important to remember that the Recovery Rebate Credit was part of three rounds of COVID stimulus payments issued by the federal government. These payments were aimed at providing financial relief to individuals and families during the pandemic. The total amount distributed through these three rounds was $814 billion, and the payments were determined based on several factors, including income, tax filing status, and the number of qualifying children or dependents.
Here’s a breakdown of the three rounds of stimulus payments:
- March 2020: Under the CARES Act, eligible individuals received up to $1,200 per tax filer, and $500 per child.
- December 2020: The Consolidated Appropriations Act provided up to $600 per tax filer and $600 per child.
- March 2021: Under the American Rescue Plan, eligible individuals received up to $1,400 per tax filer and $1,400 per child.
These rounds of payments were designed to provide immediate relief to Americans struggling due to the financial impact of the pandemic. In addition, individuals were also eligible for supplemental payments if they had children or dependents.
If you believe you may be eligible for the Recovery Rebate Credit but haven't filed your tax return yet, it’s critical to do so before the deadline of April 15, 2025, to receive the special payment. Even if you did not have significant income during 2021, filing a return could help you secure the credit, provided you meet the necessary requirements. For taxpayers who are unsure whether they qualify, the IRS has posted online resources that explain the eligibility criteria in more detail, so individuals can verify if they missed any payments or if they are owed money.
