IRS sends unclaimed tax rebates to 1 million Americans

The Internal Revenue Service (IRS) announced plans to issue automatic payments to eligible taxpayers who did not claim the recovery discount credit on their 2021 tax returns.

IRS officials announced the move Friday and said the payments will be made automatically by the end of December. It follows an analysis by the agency that found about 1 million taxpayers did not claim the pandemic-related credit on their 2021 returns when they were eligible to receive it.

“The IRS continues to work hard to make improvements and help taxpayers,” IRS Commissioner Danny Werfel said in a statement. “These payments are an example of our commitment to going the extra mile for taxpayers.”

“When we looked at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were actually eligible,” Werfel said. “To minimize headaches and get this money to eligible taxpayers, we’re making these payments automatic, meaning these people won’t be required to go through the extensive process of submitting an amended return to receive it.”

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The IRS is sending recovery discount credit payments to eligible taxpayers this month. (Spencer Platt/Getty Images/Getty Images)

Most of the taxpayers who were eligible for the Recovery Rebate Credit or for one or more stimulus payments (EIP), also known as stimulus payments, have already received those credits and payments. The credit and stimulus payments were created in response to the COVID-19 pandemic.

The special payments announced by the IRS are for qualified taxpayers who filed a 2021 tax return with the Recovery Rebate Credit data field blank or filled in as $0 when the taxpayer was actually eligible for the credit.

Taxpayers who did not claim the credit or a portion of it on their 2021 tax return are expected to receive the payments from the IRS in late January 2025. The payment will be sent to the bank account listed on the taxpayer’s 2023 tax return. or to their registered address.

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Internal Revenue Service Commissioner Daniel Werfel said the agency found that about 1 million taxpayers who were eligible for the rebate did not claim it on their 2021 tax returns. (Tom Williams/CQ-Roll Call, Inc. via Getty Images/Getty Images)

The amounts of the recovery discount credit set to be paid are variable based on several factors, although the maximum payment is $1,400 per person. The IRS estimates that the total amount of payments to be distributed is about $2.4 billion.

The IRS will include a letter for taxpayers receiving their 2021 Recovery Rebate Credit payment. If a taxpayer has closed the bank account associated with their 2023 tax return since filing, taxpayers do not need to take any action as the bank will return the payment to the IRS, which will resend the refund to the taxpayer’s address of record.

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There is also a deadline looming in the first half of 2025 for taxpayers who have not filed their 2021 returns, as they must file by April 15 to still receive a recovery discount credit to which they are entitled.