Stimulus Update: How Unclaimed Stimulus Payments May Be a Blessing in Disguise

Sometimes, there really is a silver lining.

There are four groups of Americans:

• Those who file their taxes annually, no matter what's going on
• Those who occasionally miss years, then scramble to catch up
• Those who think paying taxes is for suckers and simply refuse to do so
• Those who are not required to file income taxes due to extremely low income

Today, we're going to touch on the three bottom groups -- those who do not always file a tax return (for whatever reason). We're also going to talk about how the government's current push to get stimulus checks into the bank accounts of every American owed one may end up saving folks years of aggravation.

Stick with us here. This could benefit you.

What got us thinking

In October, the IRS began sending letters to more than 9 million people who have not filed the required 2021 federal income tax return that will qualify them for stimulus checks. The IRS says that letters went out to those who may be eligible to claim some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit, or Earned Income Tax Credit.

Again, you must have filed your 2021 federal income tax return to qualify for payment. If you decide you don't want to, it could be leaving thousands of dollars on the table, money you could use to help combat the rising cost of everyday goods and services.

But that decision is totally up to you.

One surprising way filing could also benefit you

According to the IRS, tax-related identity theft is a real problem. Here's how it works:

• "Jesse" files their annual income tax return, only to receive a letter from the IRS stating that they've already filed taxes for the year. Jesse knows they haven't, and so begins the nightmare of getting it sorted.
• Jesse quickly learns that someone else has accessed their Social Security number and used it to file a tax return in Jesse's name. In fact, they've already received a refund.
• Jesse is instructed to continue paying taxes as things get sorted out. The problem is, Jesse has no idea how long that might take.

Actually, Jesse is lucky. At least they filed a tax return and know that someone else is using their Social Security number.

How someone could access your Social Security number

We like to think that if we keep our Social Security cards hidden away, no one will have access. But what about a roommate, one of you older children's friends? How about a dishonest employee of your doctor's office or credit card company? We protect our Social Security numbers but we can't prevent someone who is determined to steal it from doing so. If the thief happens to know that you don't typically pay taxes, they know that makes it easier for them to collect.

What about you?

If you're hit and miss about filing a tax return or if you're not required by law to file, how will you know if someone is out there collecting tax refunds in your name? How will you know what's in your IRS file? For example, where does the IRS think you work? How many children has this other person claimed? Are you on the hook for any mistakes made on the fraudulent tax form?

And don't forget: When someone has your Social Security number they can do far more damage than file a fraudulent tax return. They can also open credit cards in your name, take out loans, and otherwise mire you in a world of financial trouble. Identity theft can take years to clear up.

Stopping the bad players

Given the number of tax returns processed by the IRS each year, there is no reasonable way to catch all the bad players. Their tactics may be creepy, but they're also effective.

You can do your part to protect your identity by filing a tax return each year, and by doing it early enough in the tax season to beat the bad guys to the punch. Let's say you file the first week of February and someone else files in your name (or one of your children's names) in the middle of February. The IRS already has a record that you've filed and will immediately spot that something rotten is going on.

Even if you're not legally required to file, what's the harm in doing so? If nothing else, it can prevent someone else from using your Social Security number for criminal purposes.

Silver linings

There are a couple of silver linings associated with the 9 million letters sent by the IRS. The first is the number of Americans who will receive stimulus checks they are due. The second is that it serves as a reminder that filing our own tax returns prevents others from claiming our most personal information as their own.