Stimulus Update: 4 Reasons You Should Not Ignore a Letter From the IRS

Who knows? It could be good news.

It can be a bit jarring to receive a letter from the IRS. In fact, for many, just knowing the IRS has you on its radar is nerve-wracking. However, ignoring a letter from the nation's tax agency is never a good idea. Here are four reasons why it's important to face any letter you receive head-on.

1. It's possible you owe money

Let's get this one out of the way first. You may receive a letter from the IRS stating that you made a mistake on a past tax return and now owe money. We'll let you in on a little secret here: The IRS can be quite reasonable to work with, as long as you're upfront with them. If you discover that the IRS is correct and you really do owe more money, be honest. If you don't have the funds available, set up a repayment plan.

2. You could be owed a Recovery Rebate Credit

The third round of stimulus checks to hit bank accounts was thanks to the Recovery Rebate Credit, and it was a bit different from the first two. This credit provided up to $1,400 per eligible recipient, including qualifying dependents. Here's how to know if you were eligible for the full credit:

• You're a single taxpayer and earned less than $75,000.
• You're a married couple and earned less than $150,000.
• You're a U.S. citizen or U.S. resident alien.
• No one else can claim you as a dependent on their tax return.
• You have a Social Security number (SSN) and that SSN was issued before your 2021 tax return was due.

It's estimated that millions of Americans who are due their Recovery Rebate Credit never received one. Furthermore, it's quite possible that the letter you receive from the IRS is nothing more than an invitation to apply for what is rightfully yours.

3. You could be owed a Child Tax Credit

Prior to the pandemic, the normal Child Tax Credit was $2,000 per child. The expanded Child Tax Credit increased the benefit from $2,000 to up to $3,600 per child. For children under the age of 6, that came to $300 per month. For children ages 6 to 17, it was $250. Between July and Dec. 2021, the IRS mailed those monthly checks directly to parents or guardians and allowed them to claim the other half when they filed 2021 income taxes.

Here's the issue: Many of the parents or guardians who received Child Tax Credit checks don't earn enough money to be legally required to file income taxes. If they didn't file 2021 income taxes, they left between $1,500 and $1,800 on the table, depending on the age of their dependents. That's $1,500 to $1,800 that you could spend on your child now or save for an emergency.

It's possible that the IRS letter wants to remind you that there's more money waiting for your children.

4. You could be owed an Earned Income Tax Credit

Another benefit boosted by the American Rescue Plan of 2021 was the Earned Income Tax Credit (EITC). EITC is available to single taxpayers who earn under $21,430 annually and married couples filing jointly who earn $27,380.

Before the pandemic hit, EITC recipients without children could receive up to $538. With the implementation of the American Rescue Plan, that amount was raised to $1,502. And for families with three children, that benefit was boosted to as much as $6,728.

As one of the most targeted benefits offered during the pandemic, this benefit was intended to help low-income workers, including those without children at home.

If you did not file a tax return for 2021, it is very possible that money is still waiting for you to make a claim.

What to do next

Claiming what is rightfully yours is as easy as filing a 2021 tax return, even if you're not normally required to. The IRS says there is no penalty for a refund claimed on a tax return filed late this year.

If part of what you're owed is a Child Tax Credit payment, it's easy to fill out a simplified 2021 tax return through GetCTC. But you'll want to hurry. The deadline for filing through GetCTC is Nov. 15, 2022.

If you're owed any of the other credits, you also have the option of filing through Free File. Again, you'll want to do it quickly as the deadline is Nov. 17, 2022.

Remember, you only have to file one tax return, even if you're owed more than one credit.