What IRS COVID Relief Is Still Available?

In response to the economic disruptions caused by the COVID-19 pandemic, the U.S. government enacted several laws providing financial support to individuals and businesses. These measures, administered through the Internal Revenue Service (IRS), included direct payments, tax credits, and other forms of relief designed to mitigate the financial impact of the public health emergency. While many of these programs were temporary and have since concluded, the window to claim certain benefits remains open for those who have not yet received them.

Understanding which relief provisions are still accessible is important for taxpayers who may have overlooked them or were previously unaware of their eligibility. The process for claiming these remaining benefits often involves filing or amending a prior-year tax return. For most credits related to the 2021 tax year, the deadline to file or amend a return is April 15, 2025.

Direct Financial Relief for Individuals

Recovery Rebate Credit

The Economic Impact Payments, commonly known as stimulus checks, were advance payments of the Recovery Rebate Credit. Individuals who did not receive the full amount of the third payment for which they were eligible can still claim the credit by filing a 2021 tax return. Eligibility for the third payment, which was up to $1,400 per person, was largely based on adjusted gross income (AGI) and began to phase out for individuals with an AGI over $75,000.

To claim a missing payment, taxpayers must file a Form 1040 for 2021 and complete the Recovery Rebate Credit worksheet. The IRS issued Letter 6475, which summarized the total amount of the third payment received in 2021. This document is needed for accurately calculating the credit on the 2021 tax return.

Enhanced Child Tax Credit

For the 2021 tax year only, the American Rescue Plan Act significantly expanded the Child Tax Credit. The credit amount increased to $3,600 for each child under age 6 and $3,000 for each child between ages 6 and 17. This expansion also made the credit fully refundable, meaning eligible families could receive the full amount even if they had no tax liability.

From July to December 2021, the IRS sent advance monthly payments of this credit to millions of families. These advance payments represented half of the total credit amount for which a family was estimated to be eligible. To receive the remaining portion, taxpayers must file a 2021 federal tax return. The IRS sent Letter 6419 to recipients of the advance payments, detailing the total amount they received, which is necessary for reconciling the advance payments with the total credit amount on the 2021 Form 1040. Families who did not receive advance payments can claim the full credit amount by filing a return.

Tax Credits for Businesses and Employers

Employee Retention Credit

The Employee Retention Credit (ERC) was a significant refundable tax credit designed to encourage businesses to keep employees on their payroll during the pandemic. The rules for the credit differed between 2020 and 2021. For 2020, the credit was 50% of up to $10,000 in qualified wages per employee for the entire year. For 2021, the credit was increased to 70% of up to $10,000 in qualified wages per employee per quarter.

Eligibility was determined by one of two tests: a significant decline in gross receipts or a full or partial suspension of operations due to a government order. The gross receipts decline threshold was a 50% drop in 2020 and a 20% drop in 2021 compared to the same quarter in 2019. Businesses claim the ERC retroactively by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. The deadline for claiming the credit for 2020 wages has passed, but the deadline for 2021 wages extends to April 15, 2025. It is important to note that the IRS has implemented a moratorium on processing new ERC claims filed after September 14, 2023, due to a surge in fraudulent applications, and is applying increased scrutiny to all claims.

Paid Sick and Family Leave Credits

The Families First Coronavirus Response Act (FFCRA) created refundable tax credits to reimburse employers for the cost of providing paid sick and family leave to employees for COVID-related reasons. These credits were available for leave taken between April 1, 2020, and September 30, 2021. The credits compensated employers dollar-for-dollar for the cost of qualifying leave wages, up to specified per-employee limits.

Self-employed individuals were also eligible for similar credits. While the deadline to claim these credits for leave taken in 2020 has passed, the window to claim them for leave taken in 2021 remains open. Eligible businesses and self-employed individuals can claim the credits by filing an amended tax return, such as Form 941-X for employers.

Special Provisions for Charitable Giving

Enhanced Charitable Contribution Deductions

To encourage charitable giving during the pandemic, the CARES Act introduced a temporary enhancement to the rules for deducting charitable contributions for the 2021 tax year. This provision allowed taxpayers who do not itemize their deductions to take an above-the-line deduction of up to $300 for cash contributions made to qualifying charities ($600 for married couples filing jointly).

For taxpayers who do itemize, the law temporarily increased the limit on deductions for cash contributions from 60% to 100% of adjusted gross income for 2021. This allowed particularly generous individuals to potentially offset their entire tax liability through charitable giving. Taxpayers who may have overlooked these provisions can file an amended 2021 tax return to claim the increased deduction.

Tax Filing and Payment Flexibility

Penalty Abatement and Relief

Taxpayers whose ability to file or pay on time was directly impacted by the pandemic may still request penalty abatement. This can be done through the first-time penalty abatement program or by establishing “reasonable cause.” A reasonable cause argument typically requires showing that the taxpayer exercised ordinary business care and prudence but was still unable to meet their tax obligations due to circumstances beyond their control, a standard that many pandemic-related situations could meet.

Flexible Collection Options

The IRS also emphasized its commitment to working with taxpayers struggling with tax debt due to the pandemic. The agency highlighted the availability of flexible payment options to help individuals and businesses manage their liabilities without undue hardship. These established programs were made more accessible to those facing financial difficulties.

Options such as Installment Agreements allow taxpayers to make monthly payments for up to 72 months. For those with more significant tax debt who cannot pay the full amount, an Offer in Compromise (OIC) may be an option. An OIC allows certain taxpayers to resolve their tax liability with the IRS for a lower amount than what they originally owed, based on their ability to pay and overall financial situation. The IRS encouraged taxpayers impacted by COVID-19 to proactively contact the agency to explore these collection alternatives.