The IRS has successfully disbursed all the initial, subsequent, and tertiary Economic Impact Payments. The majority of eligible individuals have received their stimulus funds and are therefore not eligible to claim a Recovery Rebate Credit.
Recovery Rebate Credit
The IRS has successfully issued all three rounds of Economic Impact Payments. The majority of eligible individuals have already received their stimulus payments and are not eligible to apply for a Recovery Rebate Credit.
For those who did not receive their full stimulus payment or only received a partial payment, there is a possibility to claim a Recovery Rebate Credit on their federal tax return for the year 2024.
- The 2020 Recovery Rebate Credit advance payments were made in the first and second rounds of the Economic Impact Payments, which were submitted with a 2020 tax return. 2020 and the beginning of 2021 saw their release.
- The 2021 Recovery Rebate Credit advance payments, which were claimed on a 2021 tax return, included the plus-up payments of the third wave of Economic Impact Payments. It was released in March 2021 and remained in circulation until December 2021.
To determine eligibility for claiming a Recovery Rebate Credit, individuals are advised to review the information provided below for tax years 2020 and 2021.
Recovery Rebate Credit Amount
You may have received stimulus payments related to COVID-19, specifically the first and second Economic Impact Payments (EIP), or both. The amounts of these payments were determined based on your adjusted gross income (AGI) and tax return filing status.
Here’s a breakdown of the payment amounts:
– The first stimulus payment ranged from $1,200 to $2,400, with an additional $500 for each dependent.
– The second stimulus payment ranged from $600 to $1,200, with an additional $600 for each dependent.
– The third stimulus payment ranged from $1,400 to $2,800, with an additional $1,400 for each dependent.
These payments were calculated based on your most recent tax return from either 2018, 2019, or 2020. It’s important to note that the first EIP provided $500 for each eligible child, the second provided $600, and the third provided $1,400. However, there hasn’t been a fourth stimulus payment at this time.
How do I Claim the Recovery Rebate Credit?
To be eligible for the Recovery Rebate Credit, it is necessary to file a US tax return for the year in which the Economic Impact Payment was issued. This requirement applies to both the two payments made in 2020 and the third stimulus payment scheduled for 2021, regardless of the necessity of filing otherwise.
To claim the Recovery Rebate Credit, include Line 30 of Form 1040 or Form 1040-SR when submitting your tax return. The instructions provided with each form will guide you on how to calculate the credit. Once you have computed the credit and completed the necessary steps, proceed with filing your tax return in the usual manner.
Eligibility for the Recovery Rebate Credit
The requirements for qualifying for the Recovery Rebate Credit are quite similar to those for the third wave of stimulus payments. The main distinction lies in the use of data from your 2021 tax return to determine eligibility for the recovery rebate credit, whereas data from your 2019 or 2020 tax return is typically used to determine eligibility for the stimulus check.
This means that you may qualify for the stimulus payment but not the credit, or vice versa. To be eligible for a tax refund in 2021 through the recovery rebate credit, you must meet the following criteria:
– Be a citizen or permanent resident of the United States.
– Not be claimed as a dependent on someone else’s return.
– Possess a valid Social Security number (SSN) issued prior to the due date of your return (including extensions) and eligible for employment.
By meeting these requirements, you can potentially qualify for the recovery rebate credit and receive a tax refund in 2021.
Who Will Get a Recovery Rebate Credit?
The majority of Americans received the full 2021 recovery rebate credit in the form of a third stimulus check. If you subtract the stimulus funds from your recovery rebate credit, it will reduce it to zero. There is no need for a worksheet to calculate the credit if you received a complete third stimulus check.
If your 2021 tax return shows a lower adjusted gross income (AGI) compared to your 2019 or 2020 tax returns, it was used to determine the amount of your third stimulus payment.
Here are some scenarios to consider:
– If you had a baby in 2021.
– If you share custody of a child, and your ex-spouse claimed them as a dependent for 2020, while you claimed them for 2021.
– If you got married in 2021, especially if there was a significant salary difference between you and your spouse.
– If you were listed as a dependent on someone’s 2019 or 2020 tax return (the one used to calculate your third stimulus payment), but not in 2021.
– If you receive Social Security or veterans benefits, didn’t file a 2019 or 2020 tax return, and have a dependent child, but the IRS didn’t receive child information from the Social Security Administration (SSA) or the Department of Veterans Affairs (VA).
– If you obtain a Social Security Number by the due date of your 2021 tax return (including requested extensions).
– If your third stimulus payment from the IRS was less than the amount you were entitled to.
– If you did not receive a third-round stimulus payment from the IRS.
Remember to consider these factors when preparing your 2021 tax return.
