IRS Announces Special Payments for Missed COVID Stimulus Funds

The IRS is working to distribute approximately $2.4 billion in payments to taxpayers who missed out on COVID-19 stimulus funds. These payments, reaching up to $1,400 per individual, are expected to be delivered in the beginning of 2025 to roughly one million people. The effort is part of the Recovery Rebate Credit initiative, designed to provide financial relief to individuals who did not properly claim the credit on their 2021 tax returns.

Who Can Receive These Payments?

These payments are being issued to individuals who filed a 2021 tax return but either failed to complete the Recovery Rebate Credit section or incorrectly listed $0 as the eligible amount, when they were actually eligible for a credit. The IRS has identified these taxpayers through internal reviews, ensuring they can receive their payments without needing to file additional paperwork or amended returns.

What Are the Payment Amounts?

The amount each taxpayer will receive depends on their individual circumstances, with a maximum payment of $1,400 per person. These funds aim to address missed opportunities for claiming the Recovery Rebate Credit and ensure eligible taxpayers receive what they are owed.

Why Is the IRS Taking Action?

During 2020 and 2021, the federal government issued three rounds of Economic Impact Payments, often called stimulus checks, to help offset the economic challenges of the pandemic. These payments were linked to a refundable tax credit known as the Recovery Rebate Credit.

However, many taxpayers failed to claim this credit when filing their 2021 tax returns, despite qualifying for it. To correct this, the IRS has initiated an automatic payment process, ensuring that eligible individuals receive their funds without needing to file an amended return.

How Will the Payments Be Delivered?

Taxpayers identified as eligible will automatically receive their payments via direct deposit or mailed checks, depending on the account or address the IRS has on file. The agency is also sending out notifications explaining the payments and confirming eligibility. The process is designed to be straightforward. If a taxpayer filed a return for 2021, and was eligible, but did not receive the credit, there is nothing to be done as the IRS will automatically issue the credit.

What If You Haven’t Filed Your 2021 Tax Return?

Individuals who have not yet submitted a 2021 tax return may still qualify for the Recovery Rebate Credit, provided they file before the April 15, 2025, deadline. This includes individuals who may not have earned enough income during the applicable period to require filing a return. However, filing is still required to claim the credit.

A Look Back at COVID Stimulus Payments

The federal government issued three separate rounds of stimulus payments to support individuals and families during the pandemic:

• March 2020 (CARES Act): Provided up to $1,200 per taxpayer and $500 per qualifying child.
• December 2020 (Consolidated Appropriations Act): Provided up to $600 per taxpayer and $600 per qualifying child.
• March 2021 (American Rescue Plan Act): Provided up to $1,400 per taxpayer and $1,400 per qualifying child.

These payments were determined based on income levels, filing status, and the number of qualifying dependents in each household.

LMC is dedicated to staying updated on these developments and advising clients effectively. For more information or questions, please reach out to your LMC professional.