The Internal Revenue Service (IRS) announced the distribution of automatic payments of up to $1,400 per individual, targeting taxpayers who did not claim the Recovery Rebate Credit on their 2021 tax returns. This initiative aims to assist individuals and families who are eligible yet missed out on this financial support. By late January, the IRS will issue these payments either through direct deposit or by paper checks to the addresses listed on 2023 tax returns. The IRS Commissioner, Danny Werfel, emphasized the automatic nature of these payments, ensuring taxpayers do not need to file an amended return to receive the funds.
"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," – IRS Commissioner Danny Werfel
Individuals with an adjusted gross income of up to $75,000 and married couples filing jointly with incomes up to $150,000 are eligible for the full credit. However, as incomes rise above these thresholds, the credit begins to phase out and is completely eliminated for individuals earning $80,000 or more and married couples with incomes of $160,000 or more. For a family of four, including two qualifying dependents, the total payment could reach up to $5,600. The maximum payment stands at $1,400 per individual and $2,800 per married couple.
If you believe you are eligible but do not receive an automatic payment, you can claim the Recovery Rebate Credit by filing a 2021 tax return. The deadline for claiming this credit is April 15. This effort by the IRS seeks to address the oversight faced by approximately one million taxpayers who were entitled to this credit but failed to claim it initially.
"Looking at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were actually eligible," – IRS Commissioner Danny Werfel
The IRS plans to disburse around $2.4 billion in automatic payments to those eligible individuals who missed claiming the credit. It is important to note that these payments are not part of this year's tax refund but a separate financial support mechanism stemming from the economic impact of the COVID-19 pandemic.
Treasury Secretary Janet Yellen highlighted that the sudden COVID-19 shutdown led to significant disruptions in income sources for many people, necessitating stimulus checks to prevent further economic hardship. The goods people needed from China and other parts of the world faced substantial supply chain challenges, driving up prices. These payments aim to mitigate the financial strain experienced by families and businesses during these unprecedented times.
"The payments were necessary to help avoid the suffering of people losing their livelihoods and businesses," – Treasury Secretary Janet Yellen
Eligible taxpayers need not take any action to receive their payments unless they have not filed a 2021 tax return. The IRS will automatically distribute payments based on information from previously filed returns. With one million taxpayers already set to receive these payments, the IRS hopes this effort will provide significant relief.