IRS Set to Distribute Unclaimed Tax Rebates to One Million Americans

IRS Set to Distribute Unclaimed Tax Rebates to One Million Americans

The Internal Revenue Service (IRS) has unveiled a new initiative aimed at providing automatic payments to eligible taxpayers who failed to claim the Recovery Rebate Credit on their 2021 tax returns. This move is expected to benefit approximately one million taxpayers who inadvertently overlooked this credit.

Automatic Payments to Be Issued by December 2024

On Friday, the IRS announced plans to disburse these payments automatically by the end of December. This decision follows an internal review revealing that roughly one million taxpayers missed out on the pandemic-related credit when filing their 2021 returns.

IRS Commissioner Danny Werfel expressed the agency’s dedication to assisting taxpayers, stating:
“The IRS continues to work hard to make improvements and help taxpayers. These payments exemplify our commitment to go the extra mile for taxpayers.”

According to Werfel, the complexity of the credit led many taxpayers to overlook their eligibility. To streamline the process, the IRS decided to make the payments automatic, sparing taxpayers the hassle of filing an amended return.

Why Are These Payments Being Made?

Most individuals eligible for the Recovery Rebate Credit or Economic Impact Payments (EIPs)—commonly referred to as stimulus payments—have already received them. These credits and payments were part of the government’s response to the COVID-19 pandemic to provide financial relief to American families.

However, IRS data indicates that some taxpayers either left the field for the Recovery Rebate Credit blank on their 2021 tax returns or mistakenly entered “$0” despite being eligible. The newly announced automatic payments aim to rectify this oversight.

Payment Details: What Taxpayers Should Expect

Key Information on Payment Processing:

  1. Timeline for Payments:
    Taxpayers who qualify but missed claiming the credit on their 2021 returns will receive their payments by late January 2025.
  2. Disbursement Methods:
    • Payments will be deposited into the bank account provided on the taxpayer’s 2023 tax return.
    • If the bank account has been closed, the payment will be returned to the IRS, which will then send the refund to the taxpayer’s address of record.
  3. Maximum Payment Amount:
    The payment amount varies depending on individual circumstances, but the maximum is $1,400 per person.

Estimated Total Distribution:

The IRS projects that approximately $2.4 billion will be distributed as part of this effort.

Key Dates and Payment Details

EventDetails
Announcement DateOctober 2024
Automatic Payments BeginDecember 2024
Final Disbursement DeadlineLate January 2025
Deadline for Filing 2021 Tax ReturnsApril 15, 2025
Maximum Recovery Rebate Credit$1,400 per individual
Total Estimated Payment Distribution$2.4 billion

What Happens If a Bank Account Is Closed?

The IRS has accounted for scenarios where taxpayers might have closed the bank account listed on their 2023 tax return. In such cases, the bank will return the payment to the IRS, which will then reissue the refund to the taxpayer’s last known address. Taxpayers are not required to take any action in this situation.

Filing Deadline for Unclaimed Credits

Taxpayers who have not yet filed their 2021 tax returns still have an opportunity to claim the Recovery Rebate Credit. However, the deadline to file and remain eligible for the credit is April 15, 2025. Those who miss this deadline will forfeit their chance to receive the credit.

IRS Commitment to Taxpayer Support

The IRS has emphasized its commitment to simplifying processes and ensuring eligible taxpayers receive the benefits they deserve. According to IRS Commissioner Werfel:

“Looking at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were actually 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.”

FAQs

What is the Recovery Rebate Credit?

The Recovery Rebate Credit is a tax credit introduced during the COVID-19 pandemic to provide financial relief. It applies to eligible taxpayers who missed receiving stimulus payments or were eligible for additional amounts.

Who qualifies for these automatic payments?

Taxpayers who filed a 2021 tax return but left the Recovery Rebate Credit field blank or entered “$0” despite being eligible will receive these payments automatically.

How will the payments be sent?

Payments will be deposited into the bank account listed on the taxpayer’s 2023 tax return. If the account is closed, the refund will be sent to the taxpayer’s mailing address.

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