The government issued “recovery rebate” tax credit on your 2020 or 2021 federal tax return.
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Who Qualifies for the Recovery Rebate Credit and Stimulus Payments?
You qualify for the recovery rebate credit only if the IRS didn’t give you a stimulus payment, or if you received a partial payment.
Three rounds of pandemic stimulus checks were issued in 2020 and 2021. Here’s a refresher.
1st and 2nd Rounds of Stimulus Payments
The first two payments were based on your 2018 or 2019 tax information. Individuals qualified for full stimulus payments if their adjusted gross income (AGI), which is income minus certain deductions, was $75,000 or less ($150,000 for married couples). The IRS reduced the stimulus payments by $5 for every $100 earned above the income thresholds.
The first full stimulus payment was $1,200 for single individuals, $2,400 for married couples and $500 per qualified dependent. The second full stimulus payment was $600 for single individuals, $1,200 for married couples and $600 per dependent.
If you earned more than $99,000 ($198,000 for married couples), you got no first stimulus payment. With the second stimulus check, your payment was reduced to $0 once your AGI reached $87,000 for individuals and $174,000 for married couples.
3rd Round of Stimulus Payments
The third stimulus checks were based on your 2019 or 2020 tax information. Individuals qualified for the full stimulus payment if their AGI was $75,000 or lower ($150,000 for married couples). The full payment was $1,400 for single individuals, $2,800 for married couples, and an additional $1,400 for each dependent.
If you earned more than the threshold but not more than $80,000 ($160,000 for married couples), you received a partial third stimulus payment.
Who Might Qualify for the Recovery Rebate Credit?
The income requirements for the recovery rebate tax credit are the same as for the stimulus payments. So if a stimulus check missed you or you received a partial payment, you may be eligible for additional cash if you file a federal tax return and claim the credit.
Note that if you determine the IRS issued you a stimulus check but it got lost, you should not file for the recovery rebate credit but instead ask the tax agency to trace the payment.
Who Isn’t Eligible for the Recovery Rebate Credit?
If you received full stimulus payments, you aren’t eligible for any more cash. And you can’t take the credit if someone else can claim you as a dependent.
Additionally, only U.S. citizens or “resident aliens” qualify for the recovery rebate credit. If you are a “nonresident alien”— someone who has not passed the green card test—you do not qualify for the credit.
You also are not eligible if you don’t have a Social Security number. But if you’re married and your spouse has an SSN, there are certain instances where you might still qualify for the credit even if you’re not in the Social Security system.
How To Claim the Recovery Rebate Credit on a Tax Return
You will need to file your recovery rebate worksheet along with your 2020 or 2021 federal tax return, whichever is applicable. If you file your return using any of the best tax preparation software on the market, the program will guide you through the worksheet.
“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 are entitled to claim,” says Samantha Hawkins, a certified public accountant and founder of Hawkins CPA Solutions in Upper Marlboro, Maryland.
You can find the amount of your first stimulus payment on your Notice 1444, which was mailed by the IRS. The tax agency followed up with a Notice 1444-B for the second stimulus round and Notice 1444-C for the third.
If you don’t have the notices, you can create an online account with the IRS to verify the payments you received.
If you got less than the full stimulus payment for any of the rounds, the worksheet asks you questions about your income. In some cases, you may be entitled to claim an additional stimulus payment.
You can claim missing or partial first- and second-round stimulus payments only on your 2020 federal tax return. Any missing or partial third-round stimulus payments can be claimed on your 2021 federal tax return only.
If you’re behind on your returns, you have until Sept. 30 to file your 2020 taxes penalty-free. Taxpayers who got extensions to file their 2021 returns must submit those by Oct. 17.
Your Stimulus Checks Aren’t Taxable
It’s essential to understand that a stimulus payment is not taxable. The IRS has issued guidance stating that you do not need to include the amount in your gross income or pay taxes on the money.
Still, many people don’t entirely grasp how stimulus payments affect their taxes.
“The part that I think most do not necessarily understand is that the payment is technically an advance refundable tax credit,” says Hawkins.
The stimulus payments were advance tax credits because the IRS gave you money in advance of filing your tax return. The recovery rebate credit is considered a refundable credit, meaning it can reduce the amount of taxes you owe or generate a refund to you.
One final important point: Typically, if you receive more money from the IRS than you’re entitled to, you must repay the excess amount. But the recovery rebate credit works differently. If you received a stimulus payment based on your previous tax information but no longer qualify, based on your current tax return, you don’t have to pay any stimulus money back.
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