What is the Recovery Rebate Credit?

In order to reconcile the difference with the IRS, these taxpayers will need to claim the Recovery Rebate Credit on their 2020 or 2021 federal income tax returns (depending on which stimulus they’re still missing).

Individuals who have received all of their Economic Impact Payments in 2020 or 2021 do not need to complete any information about the Recovery Rebate Credit on their tax return(s).

How to know if you qualify for the Recovery Rebate Credit

Most taxpayers who qualify for the Recovery Rebate Credit have information on their 2020 tax return that is different from their 2019 return, or differences between their 2019 and 2018 returns if discussing the first stimulus.

For example, taxpayers who had or adopted a child in 2020 would qualify for more stimulus payment connected to their new addition. Additionally, younger taxpayers who were claimed as a dependent on a 2019 return but will be filing independently on their 2020 return will also be entitled to claim the Recovery Rebate Credit.

Finally, there are several requirements that an individual must possess to qualify for the Recovery Rebate Credit, including:

• Must be a U.S. citizen or U.S. resident alien
• Can't be claimed as a dependent on another person's tax return
• Must have a Social Security number valid for employment that's issued before the due date of your 2020 tax return (including extensions)

For example, let’s say a couple had one child in 2019 and a modified adjusted gross income (MAGI) of $80,000. They received all of their EIP 1 and 2 payments for the three of them in 2020. They also had twins in 2020. They are eligible for an additional $2,200 (2×500) + (2×600) in Recovery Rebate Credit based on their twins. They will include the RRC when they file their 2020 tax return.

Who isn’t eligible?

The Recovery Rebate Credit isn’t for everyone. If a taxpayer is a dependent of another taxpayer, or if they have already received the full amount of each stimulus payment, they likely aren’t eligible for the credit. This includes family members other than children under age 17 such as dependent parents and college-age children for stimulus payments 1 and 2.

How to claim the Recovery Rebate Credit

To claim the Recovery Rebate Credit for stimulus 1 and 2, taxpayers will need to file a 2020 tax return, even if the taxpayer otherwise wouldn’t need to file a return.

First, taxpayers need to figure out how much they received from the first two stimulus checks already. Amounts can be found on your notice 1444 or 1444-B, or you can confirm how much stimulus you already received by logging into your IRS account. The stimulus amount you received is based on your 2019 tax return.

Once taxpayers have confirmed this information, they should work with their Jackson Hewitt Tax Pro or file online to figure their payment amount based on their 2020 tax return information. Taxpayers can complete the Recovery Rebate Credit Worksheet in Form 1040 to determine if they are eligible to claim the credit.

It will also be important for taxpayers to keep records of what they received for their third stimulus check, which can’t be reconciled and claimed as a Recovery Rebate Credit until the 2021 tax return is filed next year.

For taxpayers who are still waiting on their third payment, the IRS has reactivated their Get My Payment tool.

Taxpayers who don’t get the full amount of the third stimulus payment will have to reconcile the payments on their 2021 tax return next filing season. The Recovery Rebate Credit will still be available for tax year 2021.

Economic Impact Payment overview

Economic Impact Payment 1

• $1,200 per eligible taxpayer
• $500 per qualifying dependent
• Qualifying dependent is any dependent child under age 17 for the tax year.
• Phase-out starts at:
  • Single/Married Filing Separately - $75,000
  • Married Filing Joint/Qualified Widow - $150,000
  • Head of Household - $112,500

Economic Impact Payment 2

• $600 per eligible taxpayer
• $600 per child who qualifies for the Child Tax Credit
• Phase-out starts at:
  • Single/Married Filing Separately - $75,000
  • Married Filing Joint/Qualified Widow - $150,000
  • Head of Household - $112,500

Economic Impact Payment 3

• $1,400 per eligible taxpayer (phasing out between $75,000 and $80,000 for Single/Married Filing Separately taxpayers).
• $2,800 per eligible married couples (phasing out between $150,000 and $160,000 for Married Filing Jointly taxpayers).
• $1,400 per qualifying dependent with an SSN – both a child and non-child dependent regardless of age (phasing out between $112,500 and $120,000 for Head of Household taxpayers).
• This means the following:
  • A couple filing Married Filing Jointly is not eligible for a third stimulus payment if their income is $160,000 or greater.
  • A Single taxpayer would no longer be eligible if their income is $80,000 or greater.
  • A Head of Household taxpayer would no longer be eligible if their income is $120,000 or greater.
  • The number of dependents has no bearing on the phase-out for these round three stimulus payments.

About the Author

Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.

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