While most eligible taxpayers received their third economic impact (stimulus) check as early as a recovery rebate credit, there may still be some that must file tax returns to determine eligibility and amount – in this case, your income will determine this.
If their income changes, they must use a worksheet to calculate how much of a credit they are eligible to claim on their tax returns. Discover more about this credit and learn how to claim it on your return.
Eligibility
Eligibility criteria for a recovery rebate credit are similar to those for receiving third economic impact payments.
However, eligibility is determined based on your 2021 tax returns instead of 2019 or 2020 returns, which means more stimulus money may become available if circumstances change between when the IRS sent out checks and when you filed your 2021 return.
To calculate potential recovery rebate credits, you can complete the worksheet included with the Form 1040-SR instruction booklet or use any tax software program to do this calculation.
To be eligible, you must have been either a U.S. citizen or resident alien for all of 2020 and possess an active Social Security number valid for employment purposes.
Furthermore, no one may claim you as their dependent or claim you as their dependent in 2020. Moreover, this credit is fully refundable, which can help reduce tax liabilities or boost refunds.
Economic Impact Payments were advance payments of the Recovery Rebate Credit that you claimed on your 2020 tax return. Unfortunately, since most people have already received these payments, they won’t be eligible to claim additional cash through this third economic impact payment.
To determine if you can claim it, check the GetMyPayment website or contact the IRS.
Requirements
Tax refunds typically go toward any tax that remains outstanding on your return or to exceptional federal income tax liability. However, the 2021 Recovery Rebate Credit can also be reduced by paying any debts owed to other Federal agencies (not related to income tax debt) and state agencies by taxpayers.
Recipients of third Economic Impact Payments (EIPs) or plus-up payments must file their 2021 tax returns to claim their credits; use the 2021 Recovery Rebate Credit Worksheet for assistance in calculating them.
If you filed your 2021 tax return but did not receive all or part of your third EIP or plus-up payment, we can perform a trace to check whether or not it was cashed. If not cashed, we will adjust your credit and send notice of this adjustment.
Don’t amend your return to correct the recovery rebate credit amount you claimed. If you entered $0 or left line 30 blank on your return, the IRS will assume you no longer wish to claim this credit and make corrections accordingly.
However, processing may still take more time than anticipated initially. For more information, see Topic H — Correcting issues after filing returns.
Payments
However, unlike the initial two rounds of stimulus payments, which were reported as advance payments on your 2020 tax return, any checks and plus-up payments you receive during round three should be reported on your 2021 return.
You can use the IRS’s Get My Payment tool or your online account to see if and what amount your economic impact payment was.
If your third economic impact payment was earned and is missing from your 2021 tax return, requesting a trace can help locate it and increase the credit amount due.
When completed, an adjustment will be made by the IRS on your 2021 return for that payment to be adjusted appropriately.
However, if you file before the IRS completes its search of your check and determines that it was never cashed, do not include that amount on your recovery rebate credit worksheet since there will be no way of recovering this money back.
If you are filing jointly, both partners should include the total amount of their third economic impact payment and any plus-up payments on their tax returns. You can find this amount either by searching Online Account or referencing Letter 6475: Your 2021 Economic Impact Payment(s) or Notice 1444-C: Your Third Economic Impact Payments(s).
Taxes
The Recovery Rebate Credit is a tax credit, meaning it can reduce or generate refunds on taxes you owe or create a credit refund for you. But there are some issues associated with it; expressly, only individuals qualifying based on income allow for it.
If you have already received a complete third stimulus check or your qualifying income is too low, you won’t be limited. Also excluded from eligibility: anyone else can claim you as their dependent, or you don’t possess a Social Security number.
To determine your eligibility for the recovery rebate credit, you will need to file a 2021 tax return and include information from “Notice 1444-C, Your 2021 Economic Impact Payment(s).”
Once received from the IRS, contain this notice when calculating recovery rebate credit on your tax return.
If you are uncertain as to whether you were entitled to a third economic impact payment (EIP), the IRS website provides a search tool. Just enter your name and Social Security number, and a search tool will let you search based on payment status; if none or less than expected were issued, then there is also a worksheet available that allows for calculations on potential credits owed.
Conclusion
In conclusion, the timing of receiving your Recovery Rebate Credit depends on various factors, including when you file your tax return, the processing speed of the tax authorities, and the accuracy of the information provided.
It’s essential to file your tax return promptly and ensure that all required documentation is accurate to expedite the processing of your Recovery Rebate Credit.
While the specific timeline may vary, the sooner you file your tax return, the earlier you can expect to receive any eligible Recovery Rebate Credit.
Additionally, staying informed about any updates from tax authorities and complying with any specific guidelines related to the credit will contribute to a smoother and more efficient process.
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