IRS mistakenly tells thousands of Americans they won't receive their stimulus checks

FILE - President Donald Trump's name appears on the coronavirus economic assistance checks that were sent to citizens across the country April 29, 2020 in Washington, D.C. (Chip Somodevilla/Getty Images)

The IRS mistakenly told tens of thousands of Americans that the agency was offsetting their stimulus payments because of unpaid federal debt from 14 years ago.

In January, the IRS inadvertently sent letters, coded "CP21C," to more than 109,000 people informing them that the promised coronavirus relief payment had been applied as a credit to their 2007 taxes, according to the Taxpayer Advocate Service.

"We applied a credit to your 2007 tax account due to new legislation. We used all or part of your economic stimulus payment to pay your federal tax as the law allows," the letter reads. "As a result, you don’t owe us any money, nor are you due a refund."

But the letters were a glitch, the IRS said in an updated post on its stimulus payments FAQ page.

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"This notice is not accurate for anyone who received it," the agency said. "Since no payment was issued, no offsets occurred. We apologize for the confusion this may have caused. You can disregard the notice."

According to National Taxpayer Advocate Erin Collins, the letters were supposed to inform recipients that the IRS couldn't issue the first $1,200 stimulus check because it had still not processed that individual's 2019 tax return, and there was no 2018 return on which to base the payment.

If you received a letter, you can disregard it, Collins said. Eligible individuals who have not yet received the stimulus money can claim the Recovery Rebate Credit on their 2020 tax return.

The CARES Act, passed in March, provided cash payments of up to $1,200 for adults ($2,400 for couples filing jointly) and $500 per child under 17. And the $900 billion coronavirus relief package, approved at the end of December, authorized additional payments of up to $600 per adult ($1,200 for couples) and up to $600 for each qualifying child under 17.

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The first check was based on either your 2018 or 2019 tax return, while the second check was based on your 2019 return. But in some instances, Americans either didn't receive the stimulus check, or didn't receive the full amount they were entitled to, given instances like job losses or the birth of a child.

Millions of Americans joined the unemployment rank, or saw their income reduced, this year as a result of the pandemic -- meaning that many individuals who didn't initially receive the money based on their 2018 or 2019 tax returns may now qualify. Adult dependents who are no longer dependents, like college students who were claimed as dependents on their parents' return in 2019, but are filing independently in 2020, may also be eligible for the payment.

If you think the IRS owes you stimulus money, you can use a recovery rebate worksheet to calculate how much you should receive and claim that amount on Line 30 of Form 1040 and Form 1040-SR. The IRS will include your stimulus payments as part of your refund check. Even if you don't earn enough money to typically file a return, you will need to submit one this year to receive your allotted payment.

The IRS opened Free File, free online tax preparation software, in January for taxpayers who earn less than $72,000 to prepare and file their income tax returns, although they will not begin processing returns until Feb 12.

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"For 2021, eligible taxpayers who did not receive the full amount can claim it as the Recovery Rebate Credit when they file their 2020 tax return," the IRS said. "Use IRS Free File to file and claim this important benefit."

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