What Was the Recovery Rebate Credit?
The Recovery Rebate Credit was authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and paid in advance to most eligible citizens in the form of an Economic Impact Payments paid out in 2020 and early 2021.
If you did not receive the full amount to which you were entitled, you were then able to claim it instead as a refundable credit when you filed your 2020 and/or 2021 tax returns.
- The Recovery Rebate Credit allowed certain taxpayers to lower their taxes via a credit for the full Economic Impact Payment if it was not received for some reason in 2020 and/or 2021.
- If you didn't get the full amount of the third Economic Impact Payment, you may have been eligible to claim the 2020 or 2021 Recovery Rebate Credit.
- If you were eligible for a credit and did not owe taxes, the credit would have provided a tax refund.
- The Internal Revenue Service (IRS) issued more than 5 million faulty math error notices regarding Recovery Rebate Credits that did not inform taxpayers that they had to respond to the notice within 60 days.
Understanding the Recovery Rebate Credit
The CARES Act provided economic relief payments, known as Economic Impact Payments or stimulus payments, valued at $1,200 per eligible adult, based on household adjusted gross income (AGI), plus $500 for each additional qualifying dependent under 17 years of age.
The first and second rounds of Economic Impact Payments were advance payments of the 2020 Recovery Rebate Credit claimed on a 2020 tax return. They were issued in 2020 and early 2021. The third round of Economic Impact Payments, including the plus-up payments, were advance payments of the 2021 Recovery Rebate Credit claimed on a 2021 tax return. It was issued starting in March 2021 and continued through December of that year.
If you did not receive one or more of your payments or the full amount due, for example, because the income on your taxes was too high and your lower income would have qualified you—or because of a change in the number of dependents—you could have claimed the amount due as a refundable tax credit on your 2020 and/or 2021 Form 1040 or 1040-SR. Both Form 1040 and Form 1040-SR included a line specifically for the “Recovery Rebate Credit.”
If you received a Recovery Rebate Credit, it would have either increased the amount of your tax refund or lowered the amount of taxes that you owed in those years. Since it was treated as a refundable tax credit, even if you owed zero taxes, you would have received a tax refund for the amount you were owed for these stimulus payments.
Economic Impact Payments were not taxable.
Qualifying for a Recovery Rebate Credit
Before claiming a Recovery Rebate Credit, you would have had to first determine whether you were due one. Generally speaking, if you received $1,200 stimulus payments ($2,400 if married filing jointly) and your family also received $500 for each qualifying dependent child under age 17, you likely would not qualify for a Recovery Rebate Credit.
To be eligible for the credit, you must have:
- Been a U.S. citizen or U.S. resident alien in 2020 and/or 2021.
- Not have been a dependent of another taxpayer for tax years 2020 and/or 2021.
- Had a Social Security number issued before the due date of your 2020 and/or 2021 tax return (including extensions).
Once eligible, you could qualify for a full or partial Recovery Rebate Credit on your 2020 and/or 2021 returns if any of the following applied:
- You were eligible for payment but did not receive one.
- You did not receive the full amount to which you were entitled.
- Your 2020 or 2021 income made you eligible for a rebate.
- You had a child in 2020 or 2021 after you received your stimulus payment.
If you applied for an Economic Impact Payment and still haven’t received it, check your status using the Get My Payment application. Visit the Internal Revenue Service (IRS) Get My Payment Frequently Asked Questions page for more information about the status of your payment, including an explanation of the status that you receive from the application.
The IRS issued more than 5 million math error notices to taxpayers regarding claims of a Recovery Rebate Credit but failed to inform recipients that they had just 60 days to respond to the notice. The IRS said it was correcting the error by issuing supplemental notices with an additional 60-day period to respond.
What is an Internal Revenue Service (IRS) math error notice?
The Internal Revenue Service (IRS) uses computers to screen all tax returns. When the computer finds a math error, in favor of or against the taxpayer, the IRS recalculates taxes, assesses interest or penalties, and sends a letter to the taxpayer detailing the error. Taxpayers have 60 days to respond to the letter, or they will be liable for any amount assessed.
Can I still claim a Recovery Rebate Credit if I already filed my 2020 or 2021 taxes?
If you filed your 2020 and/or 2021 taxes and failed to claim a Recovery Rebate Credit, you can still try to file an Amended Tax Return 1040-X. The IRS will not calculate your Recovery Rebate Credit if you did not enter an amount on your original tax return. Taxpayers have 3 years to file an amended return.
What if I discover that I made a mistake on my Recovery Rebate Credit request?
The IRS states, “DO NOT file an amended tax return.” The IRS will find and fix the error and send you a notice. There could be a delay in processing your tax return.