If You Receive This IRS Incentive Check Letter, Don’t Panic
If you received a CP21C Notice from the IRS suggesting that your incentive payments be used to pay off your existing tax debt, do not worry, the letter was sent in error . The IRS will not withhold your payment, whether you have already received a check or plan to request a discount as part of your tax return.
The letter was a blast from the past
If you are one of the 109,000 people who received the letter , you may already have noticed that something went wrong as it looks like the IRS accidentally brushed the dust off a message sent 14 years ago. It states here:
We have credited your tax account for 2007 due to new legislation. We have used (reimbursed) all or part of your stimulus payment to pay federal tax as required by law.
This is an unfortunate mistake as there has been a lot of confusion as to whether tax returns or tax credits can be refunded or taxed by the IRS on unpaid tax bills or overdue student loans. Rest assured this is not the case for the vast majority of taxpayers: the first incentive payment can only be paid to pay child support, and the second incentive pay cannot be paid at all to pay off any debt. Checks are also tax deductible.
“This notice is incorrect for everyone who received it. Since no payment was made, no set-off was made. We apologize for any inconvenience this may cause. You can ignore this notice, ”says the updated IRS FAQ . The letter also suggests calling the general phone number to fix the problem, but don’t worry – the phone line is almost always congested.
What did he have to say
According to the Taxpayer Advocate Service , the letter should have indicated that the IRS could not issue the first check because the IRS had not processed the 2019 taxpayer return and there was no 2018 return on which to base that payment. The solution, however, is to claim the repayable recovery credit on your 2020 tax return. For more information on obtaining a loan, click here .