Stimulus checks have come and gone for most people, along with the pandemic. But oddly enough, 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 they skipped claiming a much-talked-about stimulus credit worth a great deal of money. Most likely, they didn’t realize they qualified.
Those who will receive this special payment either left the line for the recovery rebate credit blank on the 2021 return or filled in a $0 when they were actually eligible for the recovery rebate credit.
Now that the money is being sent, you need to check your bank account. Watch your mailbox. Some filers will receive the money via direct deposit, others could receive it by paper check in the mail. The IRS said it would send letters alerting taxpayers that the money is coming.
The Internal Revenue Service is taking a special step to issue the money to these taxpayers after the agency reviewed its internal data, which indicated eligibility.
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The recovery rebate credit was the last of three rounds of stimulus payments issued to people by the federal government to shore up the economy after the pandemic hit.
When will an extra stimulus check arrive?
The IRS did not give exact dates for when to look out 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 by late January.
Some people who overlooked the credit when filing a tax return three years ago might find that the money might be in their bank accounts in a few days. Maybe, it’s already there.
Eligible taxpayers in this group don’t need to do a thing to receive this stimulus money.
The IRS did not have a breakdown for how much money might be heading to specific states, such as Michigan, according to Luis Garcia, a spokesperson for the IRS in Detroit.
No doubt, we’re talking about a large number of people. It would, after all, take more than a dozen big NFL stadiums to seat 1 million people. It is a lot of folks.
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But remember, everyone isn’t receiving money now. Most people who qualified already received this cash a few years ago. And 1 million taxpayers is really only a tiny fraction of the more than 140 million tax returns that the IRS expects to receive for tax year 2024 before 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 automatic, meaning these people will not be required to go through the extensive process of filing an amended return to receive it.”
How much stimulus cash might I receive?
The dollar amount that people will see will vary significantly.
The recovery rebate credit amounted to up to $1,400 per person when claimed on 2021 federal income tax returns. Or it was up to $2,800 for a married couple filing jointly. The credit also would apply to all qualifying dependents claimed on a tax return.
A single person with no dependents could have received a maximum credit of $1,400.
Married taxpayers who filed a joint return that claimed two qualifying dependents on the 2021 return could have qualified for up to $5,600.
But the amount of the credit could have been reduced based on your income, even if you qualified.
The 2021 recovery rebate credit includes additional amounts for each qualifying dependent claimed on their return, not just children under 17.
We’re talking about up to $1,400 in stimulus money for each qualifying dependent claimed on the return, including older relatives like 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 will the stimulus money be sent?
The stimulus payment will be sent to the bank account listed on the taxpayer’s 2023 tax return or to the address of record.
Did you end up closing the 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 reissued to the tax filer’s address of record.
What’s the deal with these stimulus checks?
The money being sent out now involves the third stimulus or economic impact payments that were 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 roughly four years ago based on information the IRS had at that time.
Those who didn’t receive money in advance or didn’t receive all the money they were qualified to get could claim the recovery rebate credit on Line 30 of the 1040 for the 2021 tax year. People who qualified and correctly claimed the credit on the tax return would have received their stimulus money in 2022, and they wouldn’t receive any more money now.
You couldn’t double-dip. The IRS subtracted whatever 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’re not qualified to get the money.
The third — and last — stimulus payments had a different set of complex rules for who qualified based on their income. The 2021 recovery rebate credit amount dropped to $0 pretty quickly, far more quickly than earlier stimulus programs, based on income.
Singles earning $80,000 or more in adjusted gross income in 2021 couldn’t claim the credit. Married couples earning $160,000 or more couldn’t claim the credit, either.
Based on those tougher new income limits, the IRS noted that some individuals weren’t eligible to claim the 2021 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 be getting money: Someone who already received all the money they were qualified to get.
And you won’t be getting a windfall now if you never filed a 2021 tax return. The same’s true if you were claimed as a dependent on someone else’s 2021 return, or if you are a nonresident alien for U.S. tax purposes, such as if you are not a lawful permanent resident or do not pass the substantial presence test.
Now, who might qualify now for the special rollout of stimulus money?
Maybe, your income fell substantially in 2021 from previous years, enough so that your income was within the required income limits for the third stimulus.
Maybe the IRS didn’t send an advance stimulus payment, based on your higher income in 2019 or 2020. But you would have still been eligible to claim the recovery rebate credit, based on your 2021 income.
“If the taxpayer saw a fall in their income that year on their next return filing, they could claim some or all of a payment they did not otherwise get earlier, which is the reconciliation process,” said Garrett Watson, senior policy analyst for the Tax Foundation.
Watson said the reconciliation process for the recovery rebate credit was always in the taxpayer’s favor, meaning they did not need to pay back any advance payment if their income rose in 2021 and they would not have been eligible otherwise.
“If you qualified for a third payment based on your 2019 or 2020 tax return,” the IRS notes, “the law doesn’t require you to pay back all or part of the payment you received based on the information reported on your 2021 tax return.”
Some parents of toddlers now might be seeing that surprise stimulus payment. You might qualify if you had a baby, adopted a child or had a child placed in your foster care in 2021.
Or some college grads and others might 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, could claim the recovery rebate credit on their 2021 tax return to receive a stimulus payment for a newborn.
Another quirk at the end of the age spectrum involved college grads. Someone who was claimed on their parents’ return in 2020 but was no longer a dependent in 2021 could look into 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.
The IRS, of course, 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 crush of paperwork, including a 1.5 million backlog of unprocessed amended returns in late 2022, before shifting into the 2023 tax season.
Why is the IRS sending stimulus money now?
It’s hard to speculate on 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 was selecting Billy Long, a former Missouri congressman, to take charge of the IRS.
IRS Commissioner Werfel, who arrived at the IRS in March 2023, had repeatedly stated that he intended to complete his full term through 2027. But Werfel announced his resignation Jan. 17 before Inauguration Day.
“After significant introspection and consultation with others, I’ve determined the best way to support a successful transition is to depart the IRS on Jan. 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?
The news of the special stimulus rollout might have some asking whether there a way to still claim a recovery rebate 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 might be owed. You cannot file the 2021 return after that April 15 deadline.
The IRS notes that eligible taxpayers who did not file a 2021 return must file a tax return to claim a recovery rebate credit, and that’s true even if their income from a job, business or other source was minimal or nonexistent.
Any recovery rebate 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 her on X @tompor.
