Up to 8 million American households have not received stimulus checks even though they are eligible

• The Treasury Department has said up to 8 million eligible households haven't gotten stimulus checks.
• Those households may end up not receiving their entire amounts if they owe back taxes.
• The issue could affect the latest round of $1,400 direct payments being debated in Congress.

In January, the Treasury Department said as many as 8 million American households had not received stimulus checks despite being eligible under the law.

That number consisted of both those who qualified for the $1,200 direct payments that were part of the CARES Act that passed in March 2020 as well as those eligible for the $600 payments in the bill that passed in December.

The IRS has been sending out the payments, issued in response to the coronavirus pandemic, based on data from 2018 and 2019 tax returns. The estimated 8 million households not receiving checks are those whose information the IRS did not have on file, CNN reported, including people who did not file tax returns in those years.

The legislation from both last March and December said people who owed back taxes were eligible for direct payments. But the only way for people to get the payments now is to claim them on their 2020 tax returns as a Recovery Rebate Credit, according to the Taxpayer Advocate Service, an independent government agency meant to act as an advocate for taxpayers.

And those Recovery Rebate Credits, the TAS said, may be used by the IRS to pay off outstanding debts, such as back taxes.

"This approach - forcing eligible individuals to forgo receiving an EIP that was exempt from offset if paid timely - is a problem the law and the IRS have created," the TAS said.

That means some people may never receive the full amount of the payment to which they're entitled.

The IRS created online tools last year for people to provide their information to receive payments through direct deposit. The TAS, however, said the IRS also told people they could claim the payments on their returns, without people knowing that could mean receiving a smaller payment.

Many of the people who are missing out on payments are "very low-income Americans who don't normally file taxes," as well as some people who moved or changed bank accounts, CNN reported.

"Financially struggling taxpayers who were entitled to receive the full amount of the EIP last year but did not have effectively been harmed once," the TAS said on its website. "It is unfair to harm some of these taxpayers a second time by seizing some, or all, of their stimulus payments."

A spokesman for the TAS told CNN the agency was considering what could be done to address the issue.

A third round of stimulus checks in the amount of $1,400 is still being debated in Congress but is closer to becoming reality after the Senate approved the $1.9 trillion stimulus package on Saturday, sending the measure back to the House. After the vote, President Joe Biden said Americans would start receiving this latest round of checks this month.

Have a news tip? Contact this reporter at kvlamis@insider.com.