Do you know when you need to check your recovery rebate credit? Right if you don’t get a third stimulus check, or when you get a partial check. Many are noticing issues while working on their 2021 tax return. However, to ensure that you don’t face issues, you have to go a long way. In this article, we will share with you everything about the recovery rebate card. So that you can operate better with full knowledge.
What is a Recovery Rebate Credit?
We all know how the recovery rebate tax as well as stimulus checks are in sync. The third stimulus checks are advance payment of the credit. So, if the combined total of the plus-up payment as well as the third stimulus checks is less than what your allowed recovery is, you may get the difference. You will get the difference back on your 2021 tax return. However, it will be in the form of a larger tax refund. Or, it could also be in the form of a lower tax bill.
Although, keep in mind that if your third stimulus check has exceeded the amount of the credit. In that case, you will not have to repay the difference. No matter what takes place, you will win either way. As a result, this matter assists the eligible Americans who didn’t receive the third stimulus. It also benefits those who did not get full amounts.
In some cases, even any person who has received a $1,400 third-round payment can also claim a recovery rebate credit. This matter will boost their refund or reduce the tax they owe.
Hence, even if you don’t file a 2022 tax return, make sure to see if you have qualified for the recovery rebate credit or not. If you do, then you must file to claim the credit to get a refund. You may do it even if the IRS hasn’t processed your 2020 return.
What is the Eligibility for Recovery Rebate Credit?
The eligibility for the recovery rebate credit is the same as they are for the third-round stimulus checks. However, there is only one difference. The eligibility of the stimulus has always found its base on the information of the individual’s 2019 and 2020 tax returns.
Although, compared to that, the eligibility for this is based on the information from your 2021 return. Hence, you may not need to track your tax history. What you need to know is whether you have qualified for the stimulus check or not.
Here are some facts that help you identify if you have qualified or not
- If you were, and are a US citizen or a US resident.
- One cannot claim it as a dependent on another person’s tax
- Also, one has to have a social security number valid for employment. Ensure that it has been issued before the due date of your 2021 tax return.
Know that only married couples can file for the joint return. If only one spouse has a valuable social security number, then you can only claim up to $1400. One valid SSN translates one claim. If you are claiming the other $1400 for the dependent, then he or she must have a valid SSN. If not, then they must have an ATIN.
Generally, if both of you have a valid social security number, then you can claim only $1,400 for each qualifying dependent. However, if either of you or your partner is an active member of the U.S armed forces in 2022, then you may receive $2800. Although your spouse must have a valid social security number to recurve the amount. In addition, the dependent must have a valid SSN to qualify to get $1,400.
A person who has filed in 2022, or 2022 can also claim the recovery rebate credit. The surviving spouse or the representative has to meet all the requirements to get the money.
In short, the representative must fulfill all the above-listed laws to claim the recovery rebate credit.
Way to Calculate the Recovery Rebate Credit
The method of calculating the recovery rebate credit is very easy. It is very similar to the eligibility rules. The calculation of the 2022 recovery rebate credit generally is the same as the calculation of the third stimulus. Although there is only one exception. The calculation method is based on different sources. As we have already discovered how the third stimulus checks have found their source of information from 2019 or 2020 fax returns.
Whichever that you filed recently, and when the IRS started processing your payment is the time. If you did not file a return for either of those two years, then the chances are that the IRS may base it on the information they have. The information can be anything. Most of the time, that information can be found using the social security administration. Or, if need be, they may approach Railroad Retirement Board, or Veterans Administration (VA).
Although it is only applicable if you receive any benefits from any one of those federal agencies. Nonetheless, keep in mind that the amount of your recovery rebate credit will find its source on the information on your 2021 tax return.
As with the stimulus checks, the calculation of the amount of your recovery will start with the base amount.
For many people, the base amount will start at the 2021 credit which is $1,400. However, for most married couples who have filed a joint tax return, it will start with $2,800. Yes, it is twice the general base amount. To that, you have to add on $1,400 for each dependent claimed on your 2021 return. After you add up the base amount or any additional amount for the dependants, you will need to check if your recovery rebate credit has been reduced. It may happen based on your income.
There is a chance that the credit will lower, possibly to zero if you select the single, married filing separately or a qualifying widow(er) filing status.There is a chance of that happening as well if you have an adjusted gross income above $75,000 on your 2021 tax return.
However, if you end up filing with your spouse, your credit will begin to shrink. It may only happen if your 2022 AGI is over $150,000. For people who have started claiming the head-of-household filing status, then the tax credit will reduce. It may happen if your AGI tops at least $112,500.
Keep in mind that your credit will go away if the AGI is above $80,000 (singles), $120,000 (head-of-household), or $160,000 (joint filers).
Finally, after the credit has been reduced, you need to minus it from the total third stimulus check as well as “plus-up” payments. Ensure that the number is reduced from the amount you received last year from the credit amount.
You must report the final amount on Line 30 of your 2021 federal income tax return. We are talking about Form 1040 or Form 1040-SR.
Know that the recovery rebate credit is a “refundable” credit. Hence, it means that you will get a tax refund if the credit is bigger than the tax that you would otherwise have to pay.
Much ado on Notice 1444-C, Letter 6475, and Online IRS Account
No one wants to forget how much they received last year as a third stimulus check. That is why you must know the four ways to get the information.
- The IRS would send you a notice after it sent you your third stimulus check. So, you must check 1444-c. It also sends separate notices to people who have received the plus-up payment. You may find proper payment on these notices.
- The IRS will also send another notice. It would be letter 6475 with the same information. It is the tax agency that will send these letters through March 2022. If you receive the letter, note that it will only show your half of the payment.
- You may also find the total amount to substrate from the credit from the online IRS account. The amount of your third stimulus will be available on the Tax Records tab. Under it, you will find “Economic Impact Payment Information.” If you have a joint account, then both you and your spouse will have to see your respective accounts.
- You can request the 2021 account transcript as well to acquire the details. Request online or by mail through the IRS’s Get transcript webpage.
What to do for Lost, Stolen, or Destroyed Third Stimulus Checks?
If you have lost your third stimulus check in any way, then you can ask the IRS to do the payment trace. They will see if the check has crashed. However, if you file your 2021 tax re-run before the trace has been completed, then don’t include the payment amount on the recovery rebate credit worksheet.
Ending note
Most Americans have successfully received the full amount in the 2021 recovery rebate credit as their third stimulus check payment. If you haven’t then you need to take a step ahead to get it.
Also read: 4th Stimulus Check Update 2022: Is Another Stimulus Payment Coming up?
