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The Recovery Rebate Credit Simplified
The Recovery Rebate Credit Simplified
COVID-19 took a massive toll, and its health and economic impacts still affect our day-to-day lives. To minimize the negative economic effects of the COVID-19 pandemic, the US Government introduced economic impact payments, or stimulus payments, to help Americans get through the crisis. The IRS distributed the first stimulus payment in mid-2020 and sent out the second one at the end of that year.
These stimulus payments are part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted in March of 2020. Following this, the US government passed the American Rescue Plan Act, a $1.9 trillion economic stimulus package to counter the negative impact of the pandemic, which went into effect on March 11, 2021. It included a third round of stimulus payments.
Though most of these stimulus payments have been issued by the IRS, there have been many instances of people missing out on them or receiving less than the total amount, but there are still ways you can claim that money, and the Recovery Rebate Credit is one of them.
Table of contents
What is Recovery Rebate Credit?...Read more
What’s the eligibility for a Recovery Rebate Credit?...Read more
How much can I receive as a Recovery Rebate Credit?...Read more
How to claim Recovery Rebate Credit in 2023?...Read more
I did not file my 2021 tax return. Can I apply for Recovery Rebate Credit?...Read more
How do I receive a refund of the Recovery Rebate Credit?...Read more
What is Recovery Rebate Credit?
Those eligible should have already received their stimulus payments through the CARES Act of 2020 and the American Rescue Plan Act of 2021. If not, they may be eligible to use the Recovery Rebate Credit to get what is essentially a backpay stimulus check.
Say you missed any of the three stimulus payments or received less than the full amount in any given period between 2020 and 2021. You can then apply for a Recovery Rebate Credit along with your 2022 income tax return filing. Based on the value of your credit, you’ll either get a deduction on your tax owed or you get a refund if the value of the tax deduction is higher than your income tax amount.
What’s the eligibility for a Recovery Rebate Credit?
You are eligible for a Recovery Rebate Credit if you didn’t receive your third stimulus payout or received less than the full amount. Situations in which you might apply for a recovery rebate credit include:
- If you forgot to add dependents
- You had a divorce after your last tax filing
- You got married and are no longer are eligible for joint filing and a bigger amount
- You are no longer a dependent
- Be an American citizen or have a spouse that’s an American citizen.
- Have a SSN, or your spouse must have an SSN.
- Have an Adjusted Gross Income (AGI) less than or equal to $75,000 if you are a single filer.
- Have, filing jointly with your spouse, an AGI less than or equal to $150,000.
- Have an AGI less than or equal to $112,500, if you are filing as head of the household.
Quick tip
Check your IRS account to find how much you can get through the Recover Rebate Credit.
How much can I receive as a Recovery Rebate Credit?
The amount anyone can receive for the credit varies based on a number of actors. For example, Tony had an AGI of $66,000 in 2020 and received a full amount of $1,200 for the first payout and $600 in the second. These payments were based on Tony's tax return for the 2019 tax year, and the amount for these payments varied from person to person. To see the exact amount you should have received, you can access your IRS account and check the total amount for the first, second and third stimulus check payments.
If Tony’s AGI were more than $75,000, the amount of payment/credit would have gone down by 5% of the amount exceeding the AGI. So if your AGI is $80,000, the full amount of $1,200 will decrease by 5% of $5,000. This would have made the total payable amount $1,200 - (5% of $5000=$250) = $950.
Here’s a quick infographic:
Let’s say Tony married Alison in April of 2021, and their combined AGI is now around $135,000. They would then receive a combined stimulus payout of $2,800 ($1,400 + $1,400) for the third payout. They can also apply to receive another payment if they had a child by December 2021, through the child tax credit.
In another scenario, Ellie is mentioned as a dependent on her parent’s 2020 tax return but was no longer in that age bracket in the latter part of 2021 but did not receive a stimulus payment because of her status as a dependent on her parents' 2020 tax return. In Ellie's 2021 tax return, she was eligible to file for the third stimulus check of $1,400. She can add other credit schemes like the Education Tax Credit to her tax filing, if she’s eligible for it, and avail a larger amount.
How to claim Recovery Rebate Credit in 2023?
To claim the credit, you must first be sure that you did not receive a stimulus payment or the payment you received was not the full amount you qualified for at the time. If you're certain that one of these is true, then you can mention this in your 2022 tax return.
I did not file my 2021 tax return. Can I apply for Recovery Rebate Credit?
When you are not a dependent and do not fall into any of the tax brackets, you can still receive a Recovery Rebate Credit. Even if you have never filed a tax return, you can still be eligible. In any case, you need to file a tax return to get the stimulus payout or the Recovery Rebate Credit.
How do I receive a refund of the Recovery Rebate Credit?
If the IRS determines that what you owe in taxes is less than your Recovery Rebate Credit, you’ll receive a direct payment of the difference. The IRS determines your refund amount based on IRS tax filing in the previous year.
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