IRS sends letters to millions still eligible for generous COVID-19 tax breaks

Beginning this week, more than 9 million letters will be sent to people who have yet to benefit from COVID-related stimulus benefits. We're talking about thousands of dollars for many families who have yet to claim them.

The Internal Revenue Service said the letters are being sent to individuals and families who appear to qualify for a variety of pandemic-related tax benefits but did not claim them by filing a 2021 federal income tax return.

Taxpayers who missed the April 15 deadline and owe have until Oct. 17 to file a 2021 return or face a late filing penalty. The IRS reminds people that there’s no penalty for a refund claimed on a tax return filed after the regular April 2022 tax deadline.

The IRS is urging individuals, including those with little or no income and therefore not required to pay taxes, to file by mid-November to get their payments quickly. IRS Free File remains open until Nov. 17.

The tax benefits that many who may be eligible missed include: Some or all of the 2021 recovery rebate credit, the child tax credit, the earned income tax credit and other tax credits. The letter is printed in both English and Spanish. And it provides a brief overview of the three key stimulus credits that apply to 2021 returns.

A report issued Wednesday by the U.S. Government Accountability Office once again shed a spotlight on millions of people who have not benefited from relief and how time is running out for these eligible filers. "Based on IRS and Treasury data, there could be between 9-10 million eligible individuals who have not yet received those payments," according to the GAO report.

The GAO noted that "Treasury and IRS undertook sweeping communications and outreach efforts" to make many people aware of these valuable credits.

Even so, the GAO found that many groups had difficulty receiving their money, including those who have never filed a tax return, the homeless, those who had limited or no internet access, and those with mixed immigrant status in their families.

"Part of the challenge for the IRS and Treasury in 2020 was they only had data on taxpayers that had previously filed taxes," the GAO stated.

A broader set of families were eligible for the COVID-19 stimulus payments in 2021 and the expanded child tax credit. The GAO suggested that further outreach was necessary, especially to underserved communities.

The yet-to-be-claimed benefits can be very sizable for many families and individuals.

The stimulus payment amounts for 2021, if not yet recieved, are worth up to $1,400 for each eligible adult and up to $1,400 for each dependent child and qualifying adult. Tax filers must be U.S. citizens or resident aliens with a valid Social Security number to qualify for the recovery rebate credit.

More: Tips on the Recovery Rebate CreditWhat you need to know

A single person, for example, cannot claim any recovery rebate credit with an adjusted gross income of $80,000 or more.

A married couple filing a joint return cannot claim any money for the Recovery Rebate Credit with an adjusted gross income of $160,000 or more.

The expanded child tax credit for 2021 can be worth as much as $3,600 for each qualifying child age 5 and younger. The credit is worth up to $3,000 for each qualifying child ages 6 through 17. Families can claim this credit, even if they received monthly advance payments during the last half of 2021, and did not receive the full amount due to them.

You may have received up to half of this amount through monthly payments in 2021. But you must file a tax return to receive the rest, the IRS notes in its letter to those who haven't claimed some or all of their child tax credit.

The IRS notes that you'd qualify for the full amount of the 2021 child tax credit for each qualifying child if you meet all eligibility factors and your annual income is not more than:

• $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;

• $112,500 if you are filing as a head of household; or

• $75,000 if you are a single filer or are married and filing a separate return.

See IRS.gov/coronavirus/EIP and ChildTaxCredit.gov for more information on how to complete a return.

A more generous earned income tax credit was in place for 2021, including adding some older workers who could qualify for the credit. The law also boosted the credit for childless workers. The credit for 2021 can be as much as $1,502 for workers with no qualifying children; up to $3,618 for those with one child; up $5,980 for those with two children and up to $6,728 for those with at least three children. Higher credits apply to those with lower incomes.

In 2020 and 2021, the GAO notes, the IRS and Treasury issued $931 billion in direct payments to individuals to ease financial stress due to the COVID-19 pandemic. But some eligible people never received payments.

The latest mailing, according to the IRS, identified individuals who don't typically have a tax return filing requirement because they appear to have very low incomes, based on Forms W-2, 1099s and other third-party statements available to the IRS.

The IRS said the latest letters are similar to a special IRS mailing made in September 2020 that reached out to 9 million potential non-filers and suggested that they submit a tax return for the first economic impact payment.

“The IRS wants to remind potentially eligible people, especially families, that they may qualify for these valuable tax credits,” said IRS Commissioner Chuck Rettig in a statement.

“We encourage people who haven’t filed a tax return yet for 2021 to review these options. Even if they aren’t required to file a tax return, they may still qualify for several important credits. We don’t want people to overlook these tax credits, and the letters will remind people of their potential eligibility and steps they can take.”

The only way to get the stimulus benefits now is to file a 2021 tax return.

Contact Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer.

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This article originally appeared on Detroit Free Press: IRS sends letters to millions still eligible for COVID-19 tax breaks