Many eligible citizens got an advance payment of the Recovery Rebate Credit, a program authorized and scheduled by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. People that did not claim the full amount can claim what is left as a refundable credit when submitting their 2020 tax return.
What is the Recovery Rebate Credit?
One benefit from the CARES Act was relief payments (also called stimulus payment or Economic Impact Payments). The value is $1,200 for every adult based on the AGI of the house. There is an extra $500 for every qualifying dependent within 17 years.
The 2018 and 2019 filing was the eligibility used for sending out the payment. As a result, people that did not get the payment or the full amount might be due to a higher income, or the number of dependents you had in 2020 changed. People in this category can claim the amount due on their 2020 tax return. There will be a line for "Recovery Rebate Credit" in 1040 for 2021.
It is essential to report the value of the stimulus payment you got as income when filing your tax, even though they cannot be taxed.
People who got the Recovery Rebate Credit will either have their tax refund increased or reduce the overall tax they owe. Since this will be a refundable tax credit, you will get the refund amount you owe if you owe no tax at all.
Qualifying for a Recovery Rebate Credit
You need to know if you qualify for the Recovery Rebate credit before claiming it. Everyone that got their stimulus check of $1,200 (double value for married and joint filing) and your family each got $500 for every dependent that qualifies; you might not be eligible for Recovery Rebate Credit.
Before you apply or receive your Recovery Rebate credit, you need to account for any payment for your economic impact. Here are other criteria for the credit:
You must be a citizen of America or resident alien in 2020
You are not another taxpayer's dependent for the 2020 tax year.
Your social security number was issued before you filed your 2020 tax return
If you qualify, you should get either the full refund or a partial RRC for your 2020 tax credit as long as any of the following is true:
While you qualified for payment, you did not get one.
You were entitled to more than what you eventually got.
You qualify for a rebate or a bigger one based on your 2020 income.
After your 2020 stimulus payment came in, you also had a child.
People who already had their Economic Impact Payment and their RRC payment would be lower judging by their 2020 tax return; there is no need to return the money.
For people that are yet to get their Economic Impact Payment even though they applied, there is a place to access your status after using the application to Get My Payment on Uncle Sam’s Page.
Estimating Your Recovery Rebate Credit
All 2020 form 1040 SR and Form 1040 comes with specific instructions to estimate your Recovery Rebate Credit value. You can start by getting the Notice 1444 that you got from Uncle Sam for people who got the Economic Impact payment. This notice reveals the value of money received.
Also, consider the instructions revealed on Line 30 of Form 1040-SR or 1040 and complete the worksheet provided at Line 30. With this worksheet, you can estimate the value of your RRC.
Worthy of note is that the RRC value will phase out if the 2020 AGI rises above $150,000 for married filing jointly, $75,000 for single filers, and $112,500 for a head of households.
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