The Internal Revenue Service (IRS) announced that Americans have until April 15 to claim refunds for the 2021 tax year, which include some pandemic-era relief payments. Currently, approximately 1.1 million individuals have not claimed an estimated $1 billion in refunds for that year. The IRS emphasized that, according to the law, taxpayers typically have a three-year window to file and claim tax refunds. After this period, any unclaimed funds are transferred to the U.S. Treasury.
The standard three-year window includes an additional incentive this year because of the government’s pandemic relief payments. While most entitled individuals received stimulus checks—formally known as economic impact payments (EIPs)—during the early phase of the COVID-19 pandemic, some did not. Individuals who did not file taxes for 2021 now have a reason to do so.
Three rounds of pandemic-related EIPs were distributed, amounting to $814 billion, between March 2020 and March 2021. Eligible individuals received different amounts through three key legislative acts. Most taxpayers who qualified for EIPs have either received the stimulus payment or a recovery rebate credit, the latter being a refundable credit for individuals who did not receive one or more EIPs.
In December, the IRS found that around one million taxpayers eligible for a recovery rebate credit had not claimed it on their 2021 tax returns. The agency plans to rectify this by sending notification letters and payments, either through direct deposit or by mailing checks, to eligible individuals.
There may be implications for those who did not file in 2021, as these individuals might still be eligible for the recovery rebate credit if they submit their 2021 tax return by the April 15 deadline. The IRS urges these taxpayers to file a tax return to claim the credit, even if they had little or no income.
The IRS advises taxpayers to use its online resources to view their EIPs and calculate their recovery rebate credit. It encourages individuals to start gathering necessary information for filing their 2021 tax return, advising that creating or logging into an IRS individual online account is the most efficient method.
However, there are cautions for individuals, as refunds for 2021 may be withheld if they have not filed tax returns for 2022 and 2023. Any refund amounts may be used to address outstanding debts with the IRS or other federal obligations.
The IRS is facing a challenging tax season, with extensive workforce and funding cuts expected to hinder its ability to efficiently respond to taxpayers’ inquiries. Late February saw over 6,000 IRS positions eliminated as part of efforts to reduce the federal government, spearheaded by the Department of Government Efficiency. These cuts primarily affected new employees. Despite previous efforts to enhance the agency’s capabilities through the Inflation Reduction Act of 2022, recent budget cuts continue to impact the IRS.
The IRS advises individuals needing assistance to utilize available online resources before contacting the agency directly.
