In late December, the IRS announced plans to issue automatic payments to eligible people who did not claim the Recovery Rebate Credit on their 2021 tax returns. The payments should have been sent in late January. No action is needed for eligible taxpayers to receive the credit with a maximum fee of $1,400.

Background of the Recovery Rebate Credit

As part of various COVID-19 relief programs, the federal government issued Economic Impact Payments and a Recovery Rebate Credit. The latter was to be awarded on 2021 income tax returns. Upon reviewing internal data, the IRS determined that approximately one million taxpayers overlooked claiming this refundable credit. The IRS would not typically take proactive actions to pay out this money; instead, the agency would generally remind taxpayers to claim any refunds before the statute of limitations runs out on April 15, 2025. However, to surprise many, the IRS has decided to be proactive in this case.

What you need to know about the rebate payments

No action is required on your part. If you or a family member is eligible for the credit, the IRS will automatically deposit the money in the direct deposit account noted on your 2023 tax return. You will receive a paper check if no bank account is on file. Things to note:

• Should you receive a payment, it is legitimate. There should also be a letter from the IRS explaining the payment.
• Most taxpayers already received this credit. So, there is no need to call wondering if you will get a payment. While $2.4 billion in payments going out is no small number, it only represents a small percentage of total costs to all taxpayers.
• Double-check 2021 non-filers. If you know someone who did not file a 2021 tax return, it may be worth looking at doing so before April 15, 2025, or the ability to claim this credit disappears.

Contact our RRBB advisors if you wish to review your situation or have any questions.