Published on: March 24, 2021 Last modified: April 14, 2021

Never Got Your Stimulus Check? The Recovery Rebate Tax Credit Can Help

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    The U.S. government passed a relief package in 2020 designed to help Americans get through the economic downturn caused by the COVID-19 pandemic. It included stimulus checks for taxpayers in spring 2020 and again at the beginning of 2021. Millions of eligible Americans never received their checks or did not receive the full amount, though, and that’s because of confusion about the program or mistakes made by the Internal Revenue Service (IRS) or Treasury Department. 

    The Recovery Rebate Tax Credit allows these taxpayers to receive the funds they are owed when they submit their 2020 tax returns. This guide will walk you through what the Recovery Rebate Tax Credit is, who is eligible for it, and four steps for claiming it this year.

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    What Is the Recovery Rebate Tax Credit?

    The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) included the Recovery Rebate Tax Credit to help taxpayers lessen their tax burden. The credit was paid in the form of Economic Impact Payments (stimulus checks) in 2020 and 2021. The stimulus checks sent out to most Americans were essentially a kind of advance payment of the tax credit.

    Certain taxpayers can claim the Recovery Rebate Credit on their 2020 tax return if they did not receive the full amounts of both impact payments. You may be able to get that difference back in the form of a tax refund or reduced tax bill if the total of the two checks is less than the recovery rebate amount.

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    Eligibility Requirements for the Recovery Rebate Tax Credit

    Anyone who was eligible to receive the Economic Impact Payments would also be eligible to receive the tax credit. Taxpayers do not need to complete the credit on their tax returns for the tax year 2020 if they received the full amount of both the first and second payments.

    Taxpayers with an adjusted gross income (AGI) up to $75,000 for individuals and $150,000 for joint filers were eligible to receive the full stimulus payment. The check was reduced by $5 for every $100 above these thresholds if income was higher than these amounts. Single taxpayers with income over $99,000 and joint filers over $198,000 were not eligible to receive the first payment. The amount phases out completely for the second stimulus payment at $87,000 AGI for single filers and $174,000 AGI for married couples.

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    Did You Qualify for the Economic Impact Payments in Full?

    Many taxpayers were left in confusion by this program when no payment came, unsure whether they were eligible or not. Taxpayers are eligible for the tax credit only if they qualified for a stimulus payment and did not receive the full amounts. The full amount you should have expected were:
    One other important note is that your eligibility for the Recovery Rebate Tax Credit is based on your 2020 tax return information (which will be filed in 2021), whereas the stimulus check eligibility was based on your 2018 or 2019 income. Taxpayers who saw their incomes change in 2020 may have gained or lost eligibility, depending on the change.
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    Other Eligibility Requirements for the Tax Credit

    Additional qualifiers were applied to the payments beyond the income level. Taxpayers must meet the below requirements to further qualify for the credit:
    Those meeting these basic requirements and the income requirements should have no other obstacles to receiving the checks and claiming the tax credit. It is a good idea to discuss your situation with a tax expert if you are still unsure whether you qualify. 
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    3 Steps to Claim the Credit on Your 2020 Tax Return

    There are a few basic steps to claim this credit when you begin filing taxes for 2020. Gather any records and documentation you have on any payments received, then follow the steps below.

    1. Confirm Eligibility

    Your first step is making sure you are eligible for the credit, per the above requirements. The Recovery Rebate Credit worksheet helps taxpayers figure out if they are eligible. The worksheet offers a series of questions, including whether you can be claimed as a dependent by someone else, if you were a member of the U.S. Armed Forces in the applicable tax year, the amount of your Economic Impact Payment, and others. Walking through each step helps you understand if you are eligible for the credit and then what your credit will be, discussed more below.

    2. Calculate the Credit

    The credit is calculated the same way the checks were calculated, except that the calculation is made based on different income information, as mentioned above. The stimulus checks were based on tax return income information from 2018 or 2019, while the credit is based on your 2020 tax return. If you were eligible to receive the full amount of the payments, you would subtract whatever you did receive from that number to determine the credit on your tax return.

    3. Complete Form 1040 or Form 1040-SR

    The credit needs to be claimed on individual income tax returns using Form 1040 or Form 1040-SR. Once you know your credit amount, the Recovery Rebate Credit is reported on Line 30 on Form 1040 and Form 1040-SR.

    Remember that mistakes do happen, and these matters can become complicated quickly. It is always a good idea to talk to a tax professional about your situation before filing your tax return, especially if you are uncertain about your eligibility.

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    Contact the Tax Experts at Silver Tax Group

    Eligibility for any tax rebate program can be tricky, but the team at Silver Tax Group is here to help. We will take a look at your finances to identify all the tax credits and deductions you qualify for, walk you through the process of completing and filing your tax return for 2020, as well as provide tax services such as accounting, tax consulting, audit defense, emergency tax services, and tax debt resolution.

    Reach out to Silver Tax Group to speak to a tax expert about the Economic Stimulus Payments and the Recovery Rebate Tax Credit today.

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