The Recovery Rebate Credit was authorized by CARES (Coronavirus Aid, Relief, and Economic Security Act). Suppose you were eligible for an Economic Impact Payment, also known as a stimulus payment, or received less than the full amount as advance payment in 2020; in that case, you might be eligible to claim the Recovery Rebate Credit on a 2020 federal tax return. You could claim the Recovery Rebate Credit on your 2021 tax return if you made contributions in 2021.
Are you eligible for a Recovery Rebate Tax Credit?
You are generally eligible for the Recovery Rebate Credit if the following criteria are met:
- You were a US citizen or a resident alien
- You were not claimed as a dependant
- You have an SSN(Social Security Number) issued before the due date of the 2020 tax return
If you have pending stimulus payments, you can still claim the Recovery Rebate Credit for any rebate more than your EIP for 2020.
If you decide to file a claim for the Recovery Rebate Credit, what should you know?
If you did not receive the full stimulus payment but wish to claim the Recovery Rebate Credit for your 2020 taxes, you must know the amount you received in 2020. Notice 1444B and Notice 1444B have been issued by the IRS. These numbers indicate how much you have received before any offsets were made in 2020. This form should be available to you when you are completing your taxes for the next year.
Do you have to repay the stimulus money?
No. The payment you receive will not increase the amount of taxes you owe when you file your 2020 federal tax returns.
What happens if you get the stimulus package after you submit your RRC claim?
If you have received your second stimulus payment for 2020, the Internal Revenue Service will modify your 2020 tax refund. This could indicate that you received a lower return than you had expected.
How do you best record your federal stimulus funds on your2020 federal income taxes?
This will be your first year if you have received any stimulus payments as part of the filing process. This is a confirmation that you have received all the amount you are entitled to. It will also help in the calculation of your Recovery Rebate Credit (if applicable). This decision will not affect your taxable income or tax liability.
“Recovery Rebate Credit” is the new line added to the Form 1040/1040 SR for the tax year 2020, the return you will file by 2021. This section is where taxpayers will indicate whether they have received stimulus payments and how much amount they may be owed. This will be paid to your account as a refundable credit.