How to Use Recovery Rebate Credit to Claim a Missing Stimulus Check – Forbes Advisor
Who is eligible for recovery rebate credit and stimulus payments?
You are only eligible for the recovery rebate credit if the IRS has not granted you a stimulus payment or if you have received a partial payment.
To find out if you missed the money you were entitled to, you can contact the IRS, check your IRS online account, or use the tax agency’s Get My Payment tool.
Three rounds of pandemic stimulus checks have been issued in 2020 and 2021. Here is a reminder.
1st and 2nd rounds of stimulus payments
The first two payments were based on your 2018 or 2019 tax information. People were eligible 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 has reduced stimulus payments by $5 for every $100 earned above income thresholds.
The first full stimulus payment was $1,200 for singles, $2,400 for married couples and $500 per qualified dependent. The second full stimulus payment was $600 for singles, $1,200 for married couples and $600 per dependent.
If you earned more than $99,000 ($198,000 for married couples), you did not receive a 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. People were eligible for the full stimulus payment if their AGI was $75,000 or less ($150,000 for married couples). Full payment was $1,400 for singles, $2,800 for married couples, and an additional $1,400 for each dependent.
If you earned more than the threshold but no more than $80,000 ($160,000 for married couples), you received a third partial stimulus payment.
Who might be eligible for the salvage rebate credit?
The income requirements for the stimulus rebate tax credit are the same as for stimulus payments. So if you missed a stimulus check or received a partial payment, you may be eligible for extra money if you file a federal tax return and claim the credit.
Note that if you determine that the IRS issued you a stimulus check but it was lost, you should not claim the recovery rebate credit, but rather ask the tax agency to trace the payment.
Who is not eligible for the salvage rebate credit?
If you received full stimulus payments, you are no longer eligible for more money. And you can’t take the credit if someone else can claim you as a dependant.
Additionally, only U.S. citizens or “resident aliens” are eligible for the salvage rebate credit. If you are a “non-resident alien” – someone who has not passed the green card test – you are not eligible for the credit.
You are also not eligible if you do not have a social security number. But if you’re married and your spouse has an SSN, there are some 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 clawback reimbursement worksheet with your 2020 or 2021 federal tax return, as applicable. If you are filing your return using one of the best tax preparation software on the market, the program will guide you through the spreadsheet.
“When you file your 2020 or 2021 tax return, you will need to report any stimulus checks you received along with the recovery refund credit you are entitled to claim,” says Samantha Hawkins, CPA 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 sent by the IRS. The tax agency followed up with Notice 1444-B for the second round of stimulus 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 received less than the full stimulus payment for any of the rounds, the spreadsheet asks you about your earnings. In some cases, you may be entitled to claim an additional stimulus payment.
You can claim missing or partial stimulus payments for rounds one and two only on your 2020 federal tax return. Any missing or partial stimulus payments from round three can only be claimed on your 2021 federal tax return.
If you are late on your returns, you have until September 30 to file your 2020 taxes without penalty. Taxpayers who have been granted extensions to file their 2021 returns must submit them by October 17.
Your dunning checks are not taxable
It is essential to understand that a stimulus payment is not taxable. The IRS has issued guidelines stating that you do not need to include the amount in your gross income or pay taxes on the money.
Yet many people don’t fully understand how stimulus payments affect their taxes.
“The part that I think most don’t necessarily understand is that the payment is technically a prepayable tax credit,” Hawkins says.
The stimulus payments were advance tax credits because the IRS gave you money before you filed your tax return. The salvage rebate credit is considered a refundable credit, which means it can reduce the amount of tax you owe or give you a refund.
One last important point: as a general rule, if you receive more money from the IRS than you are entitled to, you must repay the excess amount. But rebate credit recovery works differently. If you received a stimulus payment based on your previous tax information but are no longer eligible, based on your current tax return, you do not have to repay any stimulus money.