Tax Insights

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Did you receive IRS Notice CP21C? It’s wrong!

Notice CP21C has been sent to more than 109,000 taxpayers by the IRS to notify them that their Economic Impact Payment (EIP) was being “offset”.

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The notice contains the following error:

“We applied a credit to your 2007 tax account due to new legislation. We used (offset) all or part of your economic stimulus payment to pay your federal tax as the law allows.”

The above information is wrong. There were no payment issues nor did an offset occur. The IT challenges within the IRS created an incorrect notice so the notice can be disregarded if the statement above was listed on it.

Instead, the notice should have let you know that the IRS was unable to process your 2019 return in time for you to receive an EIP and there was no 2018 tax return on file to base the EIP calculation on either.

If you received this notice you will not be receiving your EIP, but you may claim the Recovery Rebate Credit (RRC) on the 2020 tax return if you are eligible. You can find out if this applies to you and find more information at the Recovery Rebate Credit section of the IRS website.

If you are eligible to claim the Recovery Rebate Credit, there will be a slight downside as it will not be received until your 2020 return has been processed. Be aware that the RRC is subject to regular offset rules for unpaid federal tax liabilities and other specific debts (as in child support or state income tax).

See Taxpayer Advocate blog for more information. If you have any questions, please contact your Henry+Horne advisor.

Natalie Hunt