Buzz
If you’ve received a “Notice CP21C” from the IRS stating that your stimulus payments will be used to cover existing tax debts, don’t be alarmed. This letter was sent by mistake. The IRS will not be garnishing your payment, regardless of whether you’ve already received the check or are claiming the rebate on your tax return.
The letter is an outdated message from the past.
If you are one of the 109,000 recipients of this letter, you may have noticed something unusual. It appears the IRS accidentally resurrected a message from 14 years ago, which reads:
We applied a credit to your 2007 tax account as part of new legislation. In line with the law, we used all or part of your economic stimulus payment to cover your federal taxes, as permitted by the rules.
This situation is unfortunate and has caused confusion, especially regarding whether the IRS could reclaim stimulus checks or credits for unpaid taxes or overdue student loans. However, rest assured, this does not apply to most taxpayers. The first stimulus payment is only eligible to be withheld for back child support, while the second one cannot be used to settle any debt. Additionally, these payments are not taxable.
According to the IRS, 'This notice is not applicable to anyone who received it. No payment was issued, so no offsets took place. We apologize for any confusion this may have caused. Please disregard the notice.' This updated information is also available in their FAQ. The letter even suggests calling their general helpline, but don’t waste your time—the line is often overwhelmed.
What the message was intended to say
The Taxpayer Advocate Service clarifies that the IRS couldn't issue the first check because they hadn’t processed the 2019 return and lacked the 2018 return to base the payment on. To resolve this, you should claim the Recovery Rebate Credit on your 2020 tax return. For further details on how to claim this credit, click here.
