What is Recovery Rebate Credit?
The Recovery Rebate Credit (RRC) is a tax credit applied to your 2020 income tax which can increase the amount of your tax refund or decrease the amount of tax you owe.
Due to the financial difficulties caused by the COVID-19 pandemic, the government provided Economic Impact Payments (EIPs) as a form of stimulus payment to help Americans. However, some individuals may have not received these payments and are wondering if they can be claimed on their taxes. According to a published article in Marca, the recovery rebate credit can be claimed on your 2020 or 2021 tax return if you did not receive an EIP.
Here’s a refresher on the three rounds of pandemic stimulus checks that were issued in 2020 and 2021:
Three rounds of advance payments were paid during 2020 and early 2021, which are known as the first, second, and third Economic Impact Payments (EIP1, EIP2, and EIP3). According to Taxes for Expats, the full amounts of these payments were received based on the taxpayer’s filing status and the number of qualifying dependents.
To receive the complete sum of all Economic Impact Payments, you should:
have been given $1,200 ($2,400 for couples filing jointly for 2020) as the first payment plus $500 for every eligible child you have in 2020
For the second payment, you should have received $600 ($1,200 for couples filing jointly for 2020) plus $600 for every qualifying child
For the third payment, you should have gotten $1,400 ($2,800 for couples filing jointly) plus $1,400 for each qualifying dependent
Who Qualifies for the Recovery Rebate Credit?
You are eligible for the recovery rebate credit only if the IRS didn’t give you a stimulus payment, or if you received a partial payment. Forbes suggests several ways to check if you have missed any money that you were supposed to receive. You can either get in touch with the IRS, check your IRS online account, or make use of the Get My Payment tool provided by the tax agency.
It is important to keep in mind that if you confirm that the IRS had issued a stimulus payment for you, but it did not reach you, you should not apply for the recovery rebate credit. Instead, you should ask the IRS to trace the payment.
How To Claim the Recovery Rebate Credit
Taxpayers who have not received their stimulus payment for either the first or second stimulus, or the 2020 Recovery Rebate Credit, should file their 2020 tax returns to claim them. They can do so by filling out Form 1040 and indicating the missing payment on Line 30. Taxpayers cannot e-file their 2020 tax returns anymore, and hence they need to fill out the forms electronically and then print, sign, and send them through the mail.
Samantha Hawkins, founder of Hawkins CPA Solutions in Upper Marlboro, Maryland, and a certified public accountant said, “When you file your 2020 or 2021 tax return, you’ll have to report the stimulus checks you received with the recovery rebate credit you entitled to claim.”
In conclusion, if you missed out on an EIP, you can still claim it on your taxes through the recovery rebate credit. Make sure to identify if you have an unclaimed recovery rebate credit and file your taxes accordingly. While the process may take some effort, it can result in a much-needed boost to your finances during these challenging times.