Recovery Rebate Credit on the 2020 Tax Return
As you settle in to do your 2020 taxes, you may have some questions about the 2020 Recovery Rebate Credit. It’s one of the biggest points of confusion for Americans filing their 2020 tax returns, and not all taxpayers will need to handle this the same way when filing returns. The Recovery Rebate Credit is a way to claim unpaid payments from the two Economic Impact Payments that were already distributed to some Americans.
Could the government still owe you stimulus payments? Here’s a look at the basics:
- The first two rounds of Economic Impact Payments were advance payments of the 2020 Recovery Rebate Credit.
- The majority of eligible people already received the payments.
- If you received a full payment, you don’t need to include the information on your 2020 tax return. You may qualify for the credit if you only received a partial payment.
- This is not a separate benefit from the Economic Impact Payments. It is a way to claim your payment if it never arrived.
- Payments are $1,200 (individuals) and $2,400 (married filing jointly) for anyone with an adjusted gross income (AGI) up to $75,000.
- The income limit is $112,500 if filing as head of household.
- The income limit is $150,000 if married and filing jointly.
- While you’ll still receive payments even if you’re over the base income thresholds, your payment will be reduced by five percent of the amount that your AGI exceeds the threshold for your filing category.
If you’re trying to claim your credit, you must file a 2020 tax return to do so! Yes, that applies even if you aren’t required to file a return for 2020 based on the income you earned. If you received partial payments for either the first or second Economic Impact Payment, you’ll need to know exactly how much you received.
What Is the Recovery Rebate Credit?
The IRS distributed Economic Impact Payments of up to $1,200 per person to more than 161 million Americans. However, not everyone received their payments. The Recovery Rebate Credit is a way for Americans who did not receive either one or both stimulus payments in full to claim what is owed to them.
The amount that you’re eligible to receive through the tax credit is based on your 2019 tax return, and you’ll need to file a return for 2020 to claim your credit if it never arrived. If you’ve received your tax refunds electronically in the past, there’s a possibility that the payment was delivered without being noticed! Check your records before you claim the credit to confirm that you’re in the group that’s eligible for this credit.
Recovery Rebate Credit Eligibility
If you received the first round of stimulus payments, there’s a good chance that you’re eligible for Economic Impact Payments. The income threshold did get pushed up a bit for the second and third rounds. This could explain why you didn’t get “full” payments this time around. Here’s a look at how to qualify for the Economic Impact Payments/Recovery Rebate Credit:
- You were a U.S. citizen or U.S. resident alien in 2020.
- You were not a dependent of another taxpayer in 2020.
- You have a Social Security number that is valid for employment.
Most Americans at all income levels will receive at least partial payments using this tax credit. Bear in mind that certain circumstances can disqualify you from the Recovery Rebate Credit. Here’s what negates eligibility:
- You can be claimed as a dependent on someone else’s taxes in 2020.
- You don’t have a valid Social Security number that was issued before the date of your 2020 tax return. If this is the case, be sure to contact a tax lawyer because there are exceptions.
- You’re an estate or trust.
- You’re a non-resident alien.
The bottom line is that this is all very new for taxpayers. What’s more, there has been lots of confusion floating around about exactly who is entitled to receive these credits. If you’re concerned that you’re not receiving the full amount that you’re eligible for, make sure to contact a tax expert prior to the 2021 tax deadline to claim the full credit correctly.
How To File for the Recovery Rebate Credit if You Are Eligible
When you file your 2020 tax return electronically, tax software may help you figure out your 2020 Recovery Rebate Credit. You can also use the IRS’s Recovery Rebate Credit Worksheet: Form 1040 and Form 1040-SR instructions to determine how much you can claim. To determine any amounts you’ve already received from the Economic Impact Payments, you can view your IRS account online to see the payment amounts listed among your tax information. If you received payments, you should have received IRS letters for Notice 1444 and 1444-B, which include the same information found online.
Note that any amount you received for the first and second Economic Impact Payments will reduce the amount that you’re eligible to receive when you file for your Recovery Rebate Credit on your 2020 return. When you file electronically, your Recovery Rebate Credit amount will be sent as a tax refund via direct deposit to the account where you have refunds sent. However, you can also request to use a bank account, prepaid card, or alternative as long as you’re able to provide routing and account numbers.
How to Deal With the Recovery Rebate Credit for a Child Born in 2020
A child born between Jan. 1 and Dec. 31 of 2020 can qualify for both Economic Impact Payments as long as their parents are under the qualifying income threshold. This means a child born in 2020 may receive two checks totaling $500 and $600. However, the reason why you may not have received payments for this child is that the IRS and Treasury were looking at your 2019 returns to see how much you’re owed. You can apply for the credit for your child on your 2020 tax return, even if all other qualifying recipients in your family already received their payments.
Get Help Claiming Your Recovery Rebate Credit on the 2020 Tax Return
If you haven’t received your full Economic Impact Payments, there’s a strong chance you’re eligible for the IRS recovery rebate credit. Don’t let this credit that could potentially total several thousand dollars slip through your fingers. Claim the recovery rebate tax credit on your 2020 tax return before the deadline for filing your federal tax return arrives on May 17 of 2021.If you have any questions about how to claim this credit, Tax Group Center is here to help you! We’ve spent tax season helping individuals and families claim the Economic Impact Payments owed to them on their 2020 returns, and we can also assist you with any tax preparation questions you have about this year’s return. Contact us today for help with the 2020 Recovery Rebate Credit.