Many Americans, particularly those who live abroad, have relied on the Economic Impact Payments distributed during the COVID-19 outbreak. The full amount of the available stimulus checks was not given to everyone, nevertheless. If that applies to you, don't be concerned. You could still be able to use the IRS Recovery Rebate Credit to recoup the remaining portion of your stimulus payment.
What is the Recovery Rebate Credit ?
Three tax credits known as Economic Impact Payments, commonly referred to as stimulus payments, were distributed to the majority of Americans to lessen the financial burden caused by the COVID-19 outbreak. These were a head start on refundable credits that Americans may claim on their yearly income tax returns. The first two rounds were included in the 2020 tax year, while the third round was included in the 2021 tax year.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act authorized the Recovery Rebate Credit, which was distributed in advance to the majority of qualified residents in the form of Economic Impact Payments in 2020 and early 2021. When you submitted your 2020 and/or 2021 tax returns, you had the option to claim any amount you did not get in full as a refundable credit.
From 2020 through 2021 and beyond, other Americans' financial circumstances altered, resulting in them receiving less than they should have (or perhaps nothing at all). If this applies to you, you might be able to claim the entire sum as a refundable tax credit by using the Recovery Rebate Credit.
Any eligible person who did not receive an Economic Impact Payment (commonly known as an EIP or "stimulus payment") may make up the difference on their subsequent tax return by claiming the Recovery Rebate Credit. Any remaining funds from the third EIP may be claimed using the Recovery Rebate Credit (RRC) when you submit your 2021 tax return. Your 2021 Recovery Rebate Credit will be deducted from any 2021 taxes you owe or added to your tax refund, whichever comes first. You can electronically file your federal tax return for free through the IRS Free File Program if your income is $73,000 or less.
How Does the Recovery Rebate Credit Work ?
Even if you don't typically pay taxes, you must file a 2021 tax return in order to claim the 2021 Recovery Rebate Credit if you didn't receive the entire third Economic Impact Payment. Your 2021 Recovery Rebate Credit will be deducted from any 2021 taxes you owe or added to your tax refund, whichever comes first.
You can electronically file your federal tax return for free through the IRS Free File Program if your income is $73,000 or less. The quickest way to receive your tax refund is to submit electronically and arrange for a free, contactless direct payment into your bank account. You must enter the routing and account information in order to have your refund directly deposited into your bank account, prepaid debit card, or mobile app. Economic impact payments, also referred to as stimulus payments, were made available under the CARES Act and were valued at $1,200 for each eligible adult based on household adjusted gross income (AGI), plus $500 for each additional qualifying dependent under the age of 17.
You could have claimed the amount due as a refundable tax credit on your 2020 and/or 2021 Form 1040 or 1040-SR if you didn't receive one or more of your payments or the full amount due, for instance, because the income on your taxes was too high and your lower income would have qualified you or because the number of dependents changed. There was a line on Form 1040 and Form 1040-SR designated for the "Recovery Rebate Credit."
Your tax refund or the amount of taxes you owing in those years would have changed depending on whether you had received a Recovery Rebate Credit. Even if you had paid no taxes, you would have gotten a tax refund for the amount you owed for these stimulus payments because it was classified as a refundable tax credit.
Key Facts of Recovery Rebate Credit
- If for some reason the Economic Impact Payment was not received in 2020 or 2021, the Recovery Rebate Credit permitted some taxpayers to reduce their taxes by claiming a credit for the full Economic Impact Payment.
- You might have been qualified to file for the 2020 or 2021 Recovery Rebate Credit if you didn't get the full amount of the third Economic Impact Payment.
- A tax refund would have been given if you were qualified for a credit and did not owe any taxes.
- More than 5 million Recovery Rebate Credits notices containing math errors were issued by the Internal Revenue Service (IRS), but they failed to tell taxpayers that they had 60 days to respond.
Who is Eligible for the Recovery Rebate Credit ?
Who was eligible for the Economic Impact Payments must be addressed before thinking about the Recovery Rebate Credit. All of the following criteria had to be met at the time in order to be eligible for any of the three stimulus payments. In order to qualify for the credit, you must :
- You were either a US resident alien or a US citizen.
- You were qualified for employment since you held a current Social Security number.
- No other taxpayer claimed you as a dependent.
There were other requirements for claiming the whole amount, including minimum income requirements. The amount of benefits you may receive was decreased if your income was above the applicable threshold. For instance, the $75,000 income cutoff applied to single filers. You might still be eligible for a stimulus payment if your income in 2020 or 2021 was higher than that, but not for the whole amount.
However, if your circumstances have changed since the payments were made and you didn't receive an Economic Impact Payment (or you didn't receive the whole amount), you can still be qualified for the credits.
You would have had to decide if you were entitled to a Recovery Rebate Credit before claiming one. In general, you would not be eligible for a Recovery Rebate Credit if you received $1,200 in stimulus funds ($2,400 if married filing jointly) in addition to $500 for each eligible dependent child under the age of 17.
If any of the following applied, you might be eligible for a full or partial Recovery Rebate Credit on your 2020 and/or 2021 returns.
- You were entitled to a payout, but you didn't get one.
- The total sum to which you were entitled was not given to you.
- You qualified for a rebate based on your income in 2020 or 2021.
- In 2020 or 2021, following the receipt of your stimulus payment, you gave birth.
Check your status with the Get My Payment app if you applied for an Economic Impact Payment but haven't yet received one. For further details on the status of your payment, including an explanation of the status that you receive from the application, visit the Internal Revenue Service (IRS) Get My Payment Frequently Asked Questions website.
How to Calculate the Recovery Rebate Credit ?
The calculation of the 2021 recovery rebate credit is basically the same as the calculation of the third-round stimulus checks, with the exception that they are based on data from various sources. This is similar to the eligibility conditions. The information from your 2019 or 2020 tax return, whichever was most recently filed at the time the IRS started processing your payment, was often used to calculate third stimulus cheques. The IRS mailed a third stimulus check if you failed to file a return for any of those two years based on whatever data, if any, it had access to.
If you receive payments from one of these government organizations, the Social Security Administration (SSA), Railroad Retirement Board, or Veterans Administration (VA) frequently provided that information. The amount of your recovery rebate credit, however, is fully determined by the data on your 2021 tax return. Your recovery rebate credit is calculated using a base amount, just like the stimulus cheques. The base credit amount for most persons in 2021 is $1,400. The starting amount for married couples filing jointly with taxes is $2,800. (i.e., twice the general base amount). Then, for each dependent included on your 2021 tax return, you must add $1,400.
The next step is to calculate if your recovery rebate credit has been lowered as a result of your income after adding up the base amount and any additional amounts for your dependents. The total third-round stimulus check and plus-up payments you received last year must be deducted from the credit amount after it has been lowered (if necessary).
How Much is the Recovery Rebate Credit ?
The amount of the Recovery Rebate Credit is based on your :
- Filing status
- Number of children who qualify
- Amounts of your past Economic Impact Payments
- Adjusted gross income
If you are eligible for the full credit, you may receive up to the following amounts :
The first economic impact payment :
- $2,400 if you’re married, filing jointly.
- $1,200 for any other filing status.
- $500 for each qualifying child under age 17 at the end of 2020.
The second economic impact payment :
- $1,200 if you’re married, filing jointly.
- $600 for any other filing status.
- $600 per eligible qualifying child under age 17 at the end of 2020.
You are ineligible for any further credits if you have already received Economic Impact Payments for the full amounts for which you are qualified based on your 2020 tax return. You do not need to repay the excess money, though, if you received more than you were entitled to receive based on your 2020 tax filings.
You can determine the additional credit amount to be reported on your 2020 tax return if you got less than you are entitled to based on your 2020 circumstances. Your tax return's credit amount starts at the maximum for which you are qualified in 2020. The amount that your AGI exceeds these levels is then subtracted from this by 5% :
- $75,000 for single or married filing separately.
- $112,500 for the household's head.
- $150,000 if filing jointly with a spouse or a qualified widower.
Finally, subtract the amount of the Economic Impact Payments you received in 2020 and/or 2021 from the potential credit. On your 2020 tax return, you are not eligible for any additional credits if the result is zero or a negative sum. If your result is positive, provided you complete all requirements, you are qualified for a 2020 Recovery Rebate Credit.
How to Claim the Recovery Rebate Credit ?
On Line 30 of your 2021 federal income tax return, you must disclose the ultimate sum (Form 1040 or Form 1040-SR). The recovery rebate credit is a "refundable" credit, which means that if the credit is greater than the tax you would have to pay otherwise, you would receive a tax refund. You must submit a US tax return for the year that the Economic Impact Payment was distributed in order to be eligible for the Recovery Rebate Credit.
You can claim the Recovery Rebate Credit on Line 30 of Form 1040 or Form 1040-SR when you file your tax return. (The instructions for either form include instructions on how to compute the credit.) Simply file your tax return as usual after calculating your credit and finishing it.
To qualify for the 2021 Recovery Rebate Credit, you must submit the full amount of your third Economic Impact Payment along with any plus-up payments. When filing a tax return, using the sum of the third payments from the taxpayer's online account or Letter 6475 can lessen errors and prevent processing hold-ups while the IRS fixes the tax return. Don't include the first or second stimulus payments that you missed on your 2021 tax return.
When you electronically file your 2021 tax return, the tax software will assist you in calculating your 2021 Recovery Rebate Credit. Your recovery rebate credit, which is available for direct deposit into your bank account, will be applied to any taxes you might owe in 2021 or included in your tax refund. For your direct deposit, you can use a bank account, prepaid debit card, or other types of financial products. Both the routing and account numbers are required.
How to Find the Amount of Economic Impact Payments ?
Check your online account to see the amount of your Economic Impact Payments:
View the sum of your first, second, and third Economic Impact Payment amounts on the Tax Records page by securely logging into your IRS online account.
FAQ's
Who Will Actually Get a Recovery Rebate Credit ?
As a third stimulus check payment, the majority of Americans have already received the full amount of the 2021 recovery rebate credit. For some individuals, taking away the stimulus funding they previously got will result in a zero recovery rebate credit. Therefore, there is no need to complete the spreadsheet to calculate the credit if you received a full third stimulus check. Certain groups of persons, however, may very well wind up with a positive credit amount, resulting in a smaller tax liability in 2021 or a higher tax refund.
Where can I find my EIP3's amount ?
Use Notice 1444-C, Letter 6475, or the Online Account function on the IRS.gov website to view the amount of your EIP3.
If I already filed my taxes for 2020 or 2021, are I still able to claim a recovery rebate credit ?
You can still attempt to file an Amended Tax Return 1040-X if you filed your taxes for 2020 and/or 2021 but neglected to claim a Recovery Rebate Credit. If you did not include a sum on your initial tax return, the IRS will not compute your Recovery Rebate Credit. An amended return must be filed within three years.
What if I find that I submitted my request for a Recovery Rebate Credit incorrectly ?
"DO NOT file an amended tax return," advises the IRS. The IRS will locate the error, correct it, and then notify you. Your tax return processing may take longer than expected.
How soon can I expect to receive my Recovery Rebate Credit ?
After we receive your request for a payment trace, you will typically hear back from us within 6 weeks, though there can be delays because of staffing issues. Find out the most recent status of the services and operations affected by the IRS.
What is the recovery rebate credit for 2021?
The base credit amount for most persons in 2021 is $1,400. The starting amount for married couples filing jointly with taxes is $2,800. (i.e., twice the general base amount). Then, for each dependent included on your 2021 tax return, you must add $1,400.