IRS sends unclaimed tax refunds to 1 million Americans

The Internal Revenue Service (IRS) announced plans to make automatic payments to eligible taxpayers who did not claim the Refund Credit on their 2021 tax return.

IRS officials announced the move Friday, saying the payments would be made automatically before the end of December. That’s according to an analysis by the agency that found about one million taxpayers did not claim the pandemic-related credit on their 2021 tax return when they were eligible.

“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.”

“Looking at our internal data, we found that one million taxpayers failed to take advantage of this complex credit even though they were actually eligible,” Werfel said. “To minimize hassle and make this money available to eligible taxpayers, we are making these payments automatically, meaning these individuals do not have to go through the extensive process of filing an amended tax return to receive them.”

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The IRS is sending Recovery Rebate Credit payments to eligible taxpayers this month. (Spencer Platt/Getty Images/Getty Images)

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

The special payments announced by the IRS are aimed at qualified taxpayers who filed a 2021 tax return with the refund credit data field left blank or populated with $0, even though the taxpayer was actually entitled to the credit.

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

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

The Recovery Rebate Credit amounts payable vary based on a variety of factors, but the maximum payment is $1,400 per person. The IRS estimates that the total amount of payments to be distributed is approximately $2.4 billion.

The IRS will include a letter to taxpayers who receive their 2021 refund credit. 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 reissue the refund to the taxpayer’s address of record.

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Additionally, a deadline looms in the first half of 2025 for taxpayers who have not yet filed their 2021 tax return, as they must file the tax return by April 15 to continue receiving a refund credit to which they are entitled.