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TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Recovery Rebate Credit Payments
Were Issued to 300,000 Ineligible Taxpayers
February 23, 2026
Report Number: 2026-406-007
TIGTACommunications@tigta.treas.gov | www.tigta.gov
HIGHLIGHTS: Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
Final Audit Report issued on February 23, 2026
Report Number 2026-406-007
Why TIGTA Did This Audit
This audit was initiated to ensure
that the Recovery Rebate Credit
(RRC) payments were sent to
eligible taxpayers.
The American Rescue Plan Act of
2021 created a refundable RRC of
up to $1,400 per eligible individual
taxpayer for Tax Year 2021. The Act
also directed the IRS to make
advance payments of the RRC,
otherwise known as Economic
Impact Payments (EIPs). The
advance payments were to be
made as soon as possible but no
later than December 31, 2021.
Most eligible taxpayers have
already filed their Tax Year 2021
tax return claiming the RRC or
received the credit through an
advance EIP. However, eligible
taxpayers who did not receive an
EIP or RRC had until April 2025 to
claim the credit.
Impact on Tax Administration
At the direction of the Department
of the Treasury, in December 2024,
the IRS announced they would
begin issuing payments to eligible
taxpayers who did not claim the
RRC on their Tax Year 2021 tax
return or did not receive an EIP.
In January 2025, the IRS issued
1.2 million payments totaling
$2.4 billion to taxpayers who the
IRS determined were eligible for
the RRC.
What TIGTA Found
Our review identified that 300,843 ineligible taxpayers received
$447.8 million in erroneous RRC payments. In January 2025, we
began alerting Taxpayer Services management of the erroneous
payments. Taxpayer Services management stated that they were
aware of the 225,028 erroneous payments issued to nonresident
aliens. For the remaining 75,815 erroneous RRC payments, Taxpayer
Services management stated that they resulted from incomplete
data and other eligibility requirements that were not included in the
analysis to determine who should receive the payments.
The 300,843 taxpayers had the following characteristics that made
them ineligible:
Description
Taxpayers
Total of Payments
Nonresident aliens, i.e., filed
Form 1040-NR, U.S. Nonresident Alien
Income Tax Return.
225,028
$317.1M
Taxpayers who already received the EIP
or RRC for Tax Year 2021.
68,071
$117.1M
Individual Taxpayer Identification
Number holders who did not claim a
dependent with a valid Social Security
Number for Tax Year 2021.
4,880
$7.5M
U.S. Territory residents.
2,350
$5.1M
Taxpayers whose adjusted gross
income exceeded the income levels for
Tax Year 2021.
514
$1.1M
Total
300,843
$ 447.8M
Totals may not add due to rounding. M = Million.
Since these payments were issued through a one-time batch
process, no computer programming changes are needed at this
time. However, the IRS should consider our concerns if similar types
of advanced payments are issued in the future.
The IRS will issue a letter to the impacted taxpayers asking them to
return the payment. The IRS will also use refund offsets to recover
these erroneous payments. A refund offset means that when the
taxpayer files their next individual tax return, the IRS will offset any
refund due until the erroneous payment is recovered or the two-year
recovery period has ended, whichever occurs first.
What TIGTA Recommended
We recommended the IRS ensure that appropriate steps are taken to
recover the erroneous payments. IRS management agreed with the
recommendation and initiated a process to recover the erroneous
payments.
Treasury Inspector General for tax administration seal.
U.S. DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20024
February 23, 2026
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE
FROM:
Diana M. Tengesdal
Deputy Inspector General for Audit
SUBJECT:
Final Audit Report – Recovery Rebate Credit Payments Were Issued to
300,000 Ineligible Taxpayers (Audit No.: 2025406021)
This report presents the results of our review to ensure that automatic Recovery Rebate
Credit (RRC) payments were sent to only eligible taxpayers who missed claiming this credit
on their Tax Year 2021 tax return. This review was part of our Fiscal Year 2025 discretionary
audit coverage and addresses the major management and performance challenge of Improving
Taxpayer Service and Protecting Taxpayer Rights.
Management’s complete response to the draft report is included as Appendix III. If you have any
questions, please contact me or Deann L. Baiza, Assistant Inspector General for Audit (Returns
Processing and Account Services).
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
Table of Contents
Background.....................................................................................................................................Page 1
Results of Review .......................................................................................................................Page 2
Incomplete Data and Analytical Errors Resulted in Some Erroneous
Recovery Rebate Credit Payments.................................................................................Page 2
Recommendation 1: ........................................................................... Page 4
Appendices
Appendix I – Detailed Objective, Scope, and Methodology................................Page 5
Appendix II – Outcome Measures .................................................................................Page 6
Appendix III – Management’s Response to the Draft Report .............................Page 8
Appendix IV – Glossary of Terms ...................................................................................Page 11
Appendix V – Abbreviations.............................................................................................Page 12
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
Page 1
Background
The American Rescue Plan Act of 2021 (ARPA) created a refundable Recovery Rebate Credit
(RRC) of up to $1,400 per eligible individual taxpayer for Tax Year 2021.1 The ARPA also directed
the Internal Revenue Service (IRS) to make advance payments of the RRC, also known as
Economic Impact Payments (EIP). The advance payments were to be made as soon as possible
but not later than December 31, 2021. Figure 1 lists the eligibility requirements for the RRC.
Figure 1: Eligibility Requirements for the Recovery Rebate Credit
Eligibility Requirements
Payment
Amount
$1,400 for individual taxpayers.
$2,800 for married filing joint taxpayers.
Additional $1,400 for each dependent, including older children and adult dependents.
Identification
Requirements
The ARPA allowed taxpayers with an Individual Taxpayer Identification Number (ITIN) to
claim the RRC for their dependents who have a valid Social Security Number (SSN).2 A
qualifying dependent may also have a valid Adoption Taxpayer Identification Number.
Adjusted Gross
Income
Phase-Out
Total payment phases out ratably between the following income levels:
$75,000 - $80,000 for Single filing status.
$112,500 - $120,000 for Head of Household filing status.
$150,000 - $160,000 for Married Filing Joint and Qualifying Widow or Widower filing
status.
Eligibility
Everyone except:
·
Nonresident aliens.
·
Dependents of other individuals.
·
Estates and trusts.
·
Individuals who died before January 1, 2021.
U.S. Territories are responsible for determining who is eligible to receive an EIP or RRC
payment and the amount of the payment as well as issuing the payment.
Source: Analysis of ARPA provisions.
Most eligible taxpayers have already filed their Tax Year 2021 tax return claiming the RRC or
received the credit through an advanced EIP. Eligible taxpayers who did not receive an EIP or
RRC had until April 2025 to claim the credit by filing an original or amended Tax Year 2021 tax
return.
The Department of the Treasury directed the IRS to issue payments to eligible taxpayers who did
not claim the RRC. In December 2024, the IRS announced plans to issue automatic payments to
eligible taxpayers who did not claim the RRC on their Tax Year 2021 tax returns or did not
receive an EIP.
1 Pub. L. No. 117-2, 135 Stat. 4.
2 See Appendix IV for a glossary of terms.
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Results of Review
Incomplete Data and Analytical Errors Resulted in Some Erroneous Recovery
Rebate Credit Payments
In January 2025, the IRS issued 1.2 million payments totaling $2.4 billion to individual taxpayers
who the IRS determined were eligible for the RRC. However, we identified that 300,843 of
these payments (25 percent of all payments) totaling $447.8 million were issued to ineligible
taxpayers. Figure 2 identifies the characteristics of the ineligible taxpayers identified. As of
May 2025, the IRS recovered 28,798 of the 300,843 erroneous payments. The recovered
payments total $42.2 million.
Figure 2: Characteristics of Taxpayers Who Received Erroneous
Recovery Rebate Credit Payments
Description
Taxpayers
Total of
Payments
Nonresident aliens, i.e., filed Form 1040-NR, U.S.
Nonresident Alien Income Tax Return.
225,028
$317.1 million
Taxpayers who already received the EIP or RRC for
Tax Year 2021.
68,071
$117.1 million
ITIN holders who did not claim a dependent with a
valid SSN for Tax Year 2021.
4,880
$7.5 million
U.S. Territory residents.
2,350
$5.1 million
Taxpayers whose adjusted gross income exceeded
the income levels for Tax Year 2021.
514
$1.1 million
Total
300,843
$ 447.8 million
Source: Analysis of RRC payments issued in January 2025 and tax account information on
TIGTA’s Data Center Warehouse. Totals may not add up due to rounding.
In January 2025, we began alerting Taxpayer Services management of the erroneous payments
we identified. In February 2025, Taxpayer Services management stated that they were aware of
the 225,028 erroneous payments issued to nonresident aliens, i.e., filed a Form 1040-NR.
Taxpayer Services management stated that they identified nonresident aliens as ineligible in the
criteria. However, Taxpayer Services management learned after the payments were issued that
they had not excluded nonresident aliens from the payments.
Taxpayer Services management agreed with the remaining 75,815 erroneous RRC payments we
identified, stating that incomplete data caused some of the RRC payments to be issued to
taxpayers who already received the EIP or RRC for Tax Year 2021. Specifically, Taxpayer Services
management indicated that they used data from the IRS’s data repository that was incomplete.
In addition, other eligibility requirements provided by Taxpayer Services such as ITIN,
U.S. Territory residents, and adjusted gross income, were not included in the analysis to
determine who should receive the payments. Since these payments were issued through a
one-time batch process and there are no plans to issue future RRC payments, no computer
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
Page 3
programming changes are needed at this time. However, the IRS should consider our concerns if
similar types of advanced payments are issued in the future.
Some erroneous payments have already been recovered
As of May 2025, our analysis determined that nearly 29,000 of the erroneous payments had
already been recovered by other processes or controls, e.g., voluntary repayment, cancelled
checks, undeliverable mail, etc. The IRS will use erroneous refund procedures to recover the
remaining 272,045 erroneous RRC payments. Generally, the IRS has two years from the date of
the erroneous refund check or direct deposit to recover an erroneous refund. Figure 3 shows the
number of payments the IRS recovered as of May 2025.
Figure 3: The IRS Has Recovered Some Erroneous Payments and Will Use
Erroneous Refund Procedures to Try to Recover More
Source: Analysis of RRC payments issued in January 2025 and tax account information on
TIGTA’s Data Center Warehouse as of May 2025.
The IRS will issue a Letter 510C, Refund in Error; Return Checks, to the impacted taxpayers
asking them to return the payment. The IRS will also use refund offsets to recover these
erroneous payments. A refund offset means that when the taxpayer files their next individual tax
return, the IRS will offset any refund due until the erroneous payment is recovered or the
two-year recovery period has ended, whichever occurs first. However, the IRS cannot use
collection procedures such as filing a Notice of Federal Tax Lien or issuance of a levy to recover
these payments because the erroneous payment is the result of an IRS administrative error.
In June 2025, the IRS implemented an automated tool to initiate the erroneous refund process.
The tool generates a Letter 510C to request the voluntary payment of the erroneous refund
within 21 calendar days from the date of the letter. The tool also systemically removes the RRC
on the taxpayer’s tax account, resulting in a debt owed by the taxpayer. As of June 2025, the IRS
issued 42,033 letters 510C to taxpayers who received an erroneous RRC payment.
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Recommendation 1: The Commissioner, Taxpayer Services Division, should ensure that
appropriate steps are taken to recover the erroneous RRC payments, including issuing
Letter 510C.
Management’s Response: IRS management agreed with the recommendation.
Unreturned or unrepaid RRC amounts will be recovered through offset of any refund due
while the balance remains unpaid. We will continue to monitor accounts and will close
this action upon issuance of Form 1099-C, Cancellation of Debt, to taxpayers who do not
repay the debt by the expiration of the recovery period.
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this audit was to ensure that automatic RRC payments were sent to only
eligible taxpayers who missed claiming this credit on their Tax Year 2021 tax return. To
accomplish our objective, we:
·
Evaluated the IRS’s process to identify and issue RRC payments to eligible taxpayers as
directed by the Department of the Treasury.
·
Determined whether the IRS has procedures for recovering erroneously issued RRC
payments.
Performance of This Review
This review was performed with information obtained from the Taxpayer Services Division
Headquarters located in Atlanta, Georgia, during the period February 2025 through July 2025.
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our finding and conclusion
based on our audit objective. We believe that the evidence obtained provides a reasonable basis
for our finding and conclusion based on our audit objective.
Data Validation Methodology
During this review, we obtained extracts from the Individual Master File for Tax Year 2021, the
Individual Return Transaction File for Processing Years 2022 through 2024, and the National
Account Profile as of December 2024 and March 2025, that were available on TIGTA’s Data
Center Warehouse. We obtained the listing of taxpayers who were issued RRC payments as of
January 2025. Before relying on the data, we ensured that each file contained the specific data
elements we requested. In addition, we selected data from each extract and verified that the
data in the extracts were the same as the data captured in the Integrated Data Retrieval System.
We also performed analyses to ensure the validity and reasonableness of our data, such as
ranges of dollar values and obvious invalid values. We determined that the data were sufficiently
reliable for purposes of this report.
Internal Controls Methodology
Internal controls relate to management’s plans, methods, and procedures used to meet their
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance. We determined that the
following internal controls were relevant to our audit objective: the process for planning,
organizing, directing, and controlling program operations for the issuance of the RRC payments.
We evaluated these controls by analyzing the RRC payments, meeting with Taxpayer Services
management, and reviewing IRS procedures.
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Appendix II
Outcome Measures
This appendix presents detailed information on the measurable impact that our recommended
corrective action will have on tax administration. This benefit will be incorporated into our
Semiannual Report to Congress.
Type and Value of Outcome Measure:
·
Funds to Put to Better Use and Taxpayers Impacted – Potential; $122,494,128 in
erroneous RRC payments issued to 71,236 ineligible taxpayers (see Recommendation 1).
Methodology Used to Measure the Reported Benefit:
We obtained extracts from the Individual Master File for Tax Year 2021, the Individual Return
Transaction File for Processing Years 2022 through 2024, and the National Account Profile as of
December 2024 and March 2025.
Our analysis identified 300,843 payments totaling $447,779,609 that were issued to ineligible
taxpayers, i.e., nonresident aliens, taxpayers who had previously received their EIP or RRC,
taxpayers whose adjusted gross income exceeded the income levels, ITIN holders who did not
claim a dependent with a valid SSN, and U.S. Territory residents. Taxpayer Services management
had previously identified 225,028 payments to nonresident aliens before our notification. As a
result, our analysis identified 75,815 (300,843-225,028) ineligible taxpayers who received an
erroneous RRC payment that the IRS was not aware of being issued. These 75,815 payments
totaled $130,690,775.
Additionally, Taxpayer Services management noted that some of the erroneous payments have
already been recovered by other processes or controls, e.g., voluntary repayment, cancelled
checks, undeliverable mail, etc. We analyzed the Individual Master File as of May 2025 for the
ineligible taxpayers to remove erroneous payments that were recovered by the IRS. We
determined that 4,579 of the 75,815 RRC payments totaling $8,196,647 were recovered by the
IRS. The remaining 71,236 (75,815-4,579) ineligible taxpayers with erroneous payments totaling
$122.5 million have not been recovered as of May 2025.
Type and Value of Outcome Measure:
·
Funds to Put to Better Use and Taxpayers Impacted – Actual; $8,196,647 in erroneous
RRC payments issued to 4,579 ineligible taxpayers that were recovered by the IRS
(see Recommendation 1).
Methodology Used to Measure the Reported Benefit:
We obtained extracts from the Individual Master File for Tax Year 2021, the Individual Return
Transaction File for Processing Years 2022 through 2024, and the National Account Profile as of
December 2024 and March 2025.
Our analysis identified 300,843 payments totaling $447,779,609 that were issued to ineligible
taxpayers, i.e., nonresident aliens, taxpayers who had previously received their EIP or RRC,
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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taxpayers whose adjusted gross income exceeded the income levels, ITIN holders who did not
claim a dependent with a valid SSN, and U.S. Territory residents. Taxpayer Services management
had previously identified 225,028 payments to nonresident aliens before our notification. As a
result, our analysis identified 75,815 (300,843-225,028) ineligible taxpayers who received an
erroneous RRC payment that the IRS was not aware of being issued. These 75,815 payments
totaled $130,690,775.
Additionally, Taxpayer Services management noted that some of the erroneous payments have
already been recovered by other processes or controls, e.g., voluntary repayment, cancelled
checks, undeliverable mail, etc. We analyzed the Individual Master File as of May 2025 for the
ineligible taxpayers and determined that 4,579 of the 75,815 RRC payments totaling $8.2 million
were recovered by the IRS. The IRS does not need to issue a Letter 510C to these
4,579 taxpayers since the erroneous refund has been recovered.
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Appendix III
Management’s Response to the Draft Report
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Appendix IV
Glossary of Terms
Term
Definition
Adjusted Gross Income
Gross income minus adjustments to income. Gross income includes wages,
dividends, capital gains, business income, and retirement distributions as
well as other income. Adjustments to income include such items as
educator expenses and student loan interest.
Adoption Taxpayer
Identification Number
A number developed for issuance as a temporary tax identification number
until an SSN can be obtained for a child in the process of being adopted.
Data Center Warehouse
A collection of IRS databases containing various types of taxpayer accounts
and IRS and TIGTA employee information that is maintained by TIGTA to
analyze data for ongoing audits.
Individual Master File
The IRS database that maintains transactions or records of individual tax
accounts.
Individual Return
Transaction File
A database the IRS maintains that contains information on the individual
tax returns it receives.
Individual Taxpayer
Identification Number
Individual Taxpayer Identification Numbers are issued by the IRS to
individuals who are required to have a Taxpayer Identification Number for
federal tax purposes but do not have and are not eligible to receive an SSN.
Integrated Data Retrieval
System
An IRS computer system capable of retrieving or updating stored
information. It works in conjunction with a taxpayer’s account records.
National Account Profile
A compilation of selected entity data from various IRS Master Files and the
Social Security Administration.
Nonresident Alien
For federal tax purposes, a nonresident alien is an individual who (1) does
not possess a permanent resident card, known as a green card, or (2) has
not established a substantial presence in the U.S., e.g., foreign athlete or
entertainer performing or competing in the U.S., foreign student in the U.S.
on scholarship, employee of a foreign government or international
organization, etc.
Processing Year
The calendar year that the tax return or document is processed by the IRS.
Social Security Number
A nine-digit number issued to an individual by the Social Security
Administration. The IRS uses this number to process tax documents and
returns.
Tax Year
A 12-month accounting period for keeping records of income and
expenses used as the basis for calculating the annual taxes due. For most
individual taxpayers, the tax year is synonymous with the calendar year.
Recovery Rebate Credit Payments Were Issued to 300,000 Ineligible Taxpayers
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Appendix V
Abbreviations
ARPA
American Rescue Plan Act of 2021
EIP
Economic Impact Payment
IRS
Internal Revenue Service
ITIN
Individual Taxpayer Identification Number
RRC
Recovery Rebate Credit
SSN
Social Security Number
TIGTA
Treasury Inspector General for Tax Administration
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affecting taxpayers, contact us at www.tigta.gov/form/suggestions.
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