The Internal Revenue Service (IRS) is issuing approximately $2.4 billion in special payments to roughly one million taxpayers who failed to claim the 2021 Recovery Rebate Credit (RRC). Each eligible individual may receive up to $1,400. IRS+2support.taxslayer.com+2 The checks and direct-deposits are being sent beginning in January 2025.
If you become eligible for this payout, it raises an important question: What should you do with the payment? Below, we’ll show how to check your eligibility and how investing this payment in a broad index fund could pay off over time.
Key Takeaways
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The IRS is automatically distributing stimulus payments of up to $1,400 per person to eligible taxpayers who omitted the 2021 Recovery Rebate Credit, with payments starting January 2025.
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Eligibility depends on income thresholds, filing status, and whether you claimed the credit on your 2021 tax return. IRS+1
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If you missed the claim but are eligible, you may still receive the payment by filing a 2021 return by April 15, 2025. IRS+1
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Investing the $1,400 payment into a low-cost index fund could grow significantly over a 20-year horizon, based on historical data.
Why the IRS Is Making These Payments
The Recovery Rebate Credit was created under the American Rescue Plan Act for 2021 to allow taxpayers who did not receive the full third round of Economic Impact Payments to claim the missing amount. Taxpayer Advocate Service+1 The IRS recently identified a group of taxpayers who either filed their 2021 tax return but did not claim the credit or did not file at all—and these payments are intended to remedy that. IRS Importantly, eligible recipients generally do not need to file an amended return to receive the payment.
How to Determine If You Qualify for the Payment
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Review your 2021 tax return: Did you claim the Recovery Rebate Credit? If you left it blank or entered “0” while being eligible, you may qualify. support.taxslayer.com
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Check your filing status and income: Eligibility depends on being a U.S. citizen or resident alien, not listed as a dependent on someone else’s return, and having a valid Social Security number (or a spouse/qualifying dependent with one). IRS
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Use the IRS online tools: The IRS website provides an online account view or tools to check your refund/payment status and eligibility.
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File a late return if needed: If you did not file a 2021 return and are eligible, you must do so by April 15, 2025 to claim the payment. Greenback Expat Tax Services+1
Investing the $1,400 Payment Into an Index Fund
Rather than spending the payment immediately, one strategic option is to invest it in a diversified index fund. Here’s how:
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Choose a low-cost fund tracking a broad market index (for example a fund that follows the S&P 500).
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Open or use an existing brokerage account that allows small initial investments and low fees.
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Buy shares equivalent to your payment amount.
By leveraging historical returns—say, the S&P 500’s average return over 20 years including dividends—you may see significant growth. For example, if a nominal return of about 632% over 20 years applies (not adjusted for inflation), a $1,400 investment could grow to roughly $10,256. After adjusting for inflation (around 342% real growth in one scenario), the value might be about $6,195.
While past performance doesn’t guarantee future results, it illustrates how a small amount invested early can accumulate meaningfully over time.
The Bottom Line
Receiving the IRS’s $1,400 special payment is a valuable opportunity—whether you use it to invest, save, or pay down debt. If you qualify, make sure you check your payment status and file by the deadline. If investing is an option for you, putting this money into a low-cost, broadly diversified index fund offers a chance to turn a modest amount into a meaningful long-term asset.
In short: Make sure you don’t miss the payment—and consider using it for future financial growth.