Reminder: Claims For Recovery Rebate Credit About to Expire

Background: In response to the economic fallout from the COVID-19 pandemic, the U.S. government enacted several measures to provide financial relief to Americans. Among these measures were the Economic Impact Payments (EIPs), also known as stimulus checks. These payments were part of broader legislation to mitigate the financial strain on individuals and families nationwide. However, only some who were eligible received these payments as expected. To address this, the IRS introduced the Recovery Rebate Credit (RRC), a mechanism allowing individuals to claim on their tax return any stimulus money they were owed but did not receive. With May 17, 2024, the deadline for claiming 2020 refunds approaching, it's crucial for taxpayers to understand how to claim the 2020 credit if they have yet to receive it.

The first round of EIPs, authorized by the CARES Act in March 2020, provided up to $1,200 per eligible individual and $2,400 for married couples filing jointly, with an additional $500 for each qualifying child. A second round of payments, authorized in December 2020, offered $600 per eligible individual, $1,200 for married couples, and $600 for each qualifying child. In 2021, a third round of payments increased to $1,400 per individual, $2,800 for joint filers, and $1,400 per dependent, regardless of age.

The Recovery Rebate Credit was designed for those who still needed to receive one or both stimulus checks they were entitled to in 2020. This credit is claimed on the 2020 tax return, allowing taxpayers to receive the amount they were owed as part of their tax refund. It's important to note that the credit is also available for the third round of EIPs, but it is claimed on the 2021 tax return.

The deadline for filing 2020 tax returns was extended to May 17, 2021, providing taxpayers additional time to claim the Recovery Rebate Credit. This extension is critical for those who have yet to receive their total stimulus payment amount, as it offers an opportunity to rectify this and ensure they receive the financial support they were entitled to. In most cases, the deadline for claiming a 2020 tax refund expires three years after the original extended deadline, which brings it to May 17, 2024.

Taxpayers must fill out their 2020 tax return accurately, paying particular attention to line 30 on Forms 1040 and 1040-SR for those who have yet to claim their Recovery Rebate Credit. This line is specifically designated for the Recovery Rebate Credit. Taxpayers should calculate the amount they believe they are owed and include it in their tax return. However, it's essential to understand that the IRS will review each claim to ensure accuracy. The amount entered on the tax return may be adjusted based on the IRS's calculations, which consider various factors, including dependency status and income levels.

Several reasons may explain why the amount a taxpayer believes they are owed differs from the IRS's calculations. These include being claimed as a dependent on someone else's tax return, calculation errors, changes in the number of qualifying children, and issues with Social Security numbers. Taxpayers should carefully review their situation and consult the IRS's guidelines to understand how these factors might affect their Recovery Rebate Credit.

For those who find the process of claiming the Recovery Rebate Credit daunting, help is available. The IRS has set up a dedicated page on its website that provides detailed information about credit, eligibility criteria, and how to claim it. Additionally, this office can offer valuable assistance, ensuring taxpayers accurately claim the credit and receive the full amount they owe.

The Recovery Rebate Credit received does not count as income when determining eligibility for federal benefits such as Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Claiming credit does not affect an individual's immigration status or ability to secure a green card or immigration benefits.

Eligibility for the 2020 Recovery Rebate Credit generally requires being a U.S. citizen or U.S. resident alien, not dependent on another taxpayer, and having a Social Security number issued before the tax return's due date. The 2020 Recovery Rebate Credit can also be claimed for someone who passed away in 2020 or later. The credit is intended for lower-income individuals and phases out for higher-income taxpayers, beginning for unmarried individuals with an income of $75,000, $112,500 for those filing Head of Household, and $150,000 for married couples. 

The Recovery Rebate Credit represents a critical opportunity for individuals who still need to receive their full stimulus payments in 2020 to claim what they are owed. With the May 17, 2024, deadline approaching for 2020 returns claiming a refund, taxpayers need to act promptly. By understanding how to claim the credit and seeking assistance if needed, taxpayers can ensure they receive the financial support provided by the government in response to the COVID-19 pandemic.

Please get in touch with our office if you have questions or need assistance.