Americans were entitled to a substantial amount of stimulus funds over the past few years.
The CARES Act was enacted under President Donald Trump and provided $1,200 per adult and $500 per eligible dependent. In addition, most Americans received an additional $600 check from the Trump administration near the end of his presidency. And under President Biden, the American Rescue Plan Act authorized $1,400 payments for adults and dependents as well as an expanded Child Tax Credit that provided additional relief to parents.
The majority of this money has been deposited into American bank accounts or sent via check. There are, however, millions of people who filed tax returns to claim stimulus funds they did not receive in full.
Unfortunately, the IRS has a large backlog of tax returns to process, so many people are still waiting for at least a portion of their funds. And there is a very good chance that those who have been waiting will now be eligible for additional funds on top of their original stimulus payments. Here is why.
The IRS owes stimulus payments to Americans with unprocessed tax returns.
According to IRS regulations, the agency must process tax returns within 45 days of receipt. If more than 45 days have passed, the IRS will be required to pay interest on the owed refund. The interest rate has increased from 3 percent to 4 percent because it is tied to the federal funds rate, which was recently increased.
Due to understaffing and COVID-19-related issues, the IRS is significantly behind on processing tax refunds. There are approximately 9.6 million unprocessed tax returns. Many of the taxpayers who filed these returns are owed substantial refunds, in many cases because they claimed unpaid stimulus funds on their tax returns.
Although the IRS has not disclosed how many of the unprocessed returns are older than 45 days, the agency reported that a number of the returns they have not yet reviewed were filed prior to 2022. It is likely that a significant portion of this backlog has exceeded the 45-day limit, or will soon do so, and every taxpayer whose return isn’t processed on time can anticipate receiving a larger refund after interest is added.
The additional funds could be worth billions.
With so many unprocessed tax returns, it is likely that taxpayers will receive billions of dollars in additional interest payments on top of the stimulus money they are owed.
In the past seven years, the IRS has paid close to $14 billion in interest, of which $3.3 billion will be sent to taxpayers in 2021 alone. The agency may owe even more this year, as both President Trump and President Biden have authorized tax return extensions for 2020 and 2021. Although taxpayers were given more time, the deadline for refunds remained the same, allowing interest to accrue earlier.
Americans should be aware of this so they know what to expect when the IRS finally sends their tax refunds and they receive their stimulus funds.