2020 Recovery Rebate Credits

IRS letters explain why some 2020 Recovery Rebate Credits
are different than expected.

As people across the country file their 2020 tax returns, some are claiming the 2020 Recovery Rebate Credit (RRC). Some taxpayers who claimed the 2020 credit could be getting a different amount than expected.

Should You Claim the Recovery Rebate Credit?

It’s important to remember that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and should not or don’t need to include this information on their 2020 tax return.

If you did not receive a first or second EIP or received less than the full amounts, you may be eligible for the 2020 RRC. You must file a 2020 tax return to claim the credit, even if you don’t usually file a tax return.

When the IRS processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer’s credit based on the 2020 tax return information and the amounts of any EIP previously issued. If you are eligible, the credit will be reduced by the amount of any EIPs already issued to you.

The IRS May Make Adjustments

If there’s a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction, and continue processing the return. If a correction is needed, there may be a slight delay in processing the return, and the IRS will send a letter or notice explaining any change.

If you receive a notice saying the IRS changed the amount of your 2020 credit, pay close attention to the reason stated in the notice. Then, review your 2020 tax return, the requirements for claiming the credit, and the worksheet in the Form 1040 and Form 1040-SR instructions.

How Are Adjustments Determined?

Here are some common reasons the IRS corrected the credit:

You were claimed as a dependent on another person’s 2020 tax return.
You did not provide a Social Security number valid for employment.
A qualifying child was age 17 or older on Jan. 1, 2020.
Math errors relating to calculating adjusted gross income and any EIPs already received.

Additional information explaining what errors may have occurred is available on IRS.gov under a special section called – Correcting Recovery Rebate Credit issues after the 2020 tax return is filed. If you disagree with the IRS calculation, you should review your letter as well as the questions and answers for what information you need to have available when contacting the IRS.

Filing Your 2020 Return

If you have not yet filed your 2020 tax return, it is important to properly determine your eligibility for the 2020 RRC before you file your 2020 tax return. To calculate any credit due, start with the amount of any EIPs received. Use the RRC Worksheet or tax preparation software. If you did not save or did not receive an IRS letter or notice, you can securely access your individual tax information with an IRS online account.

The fastest way to get a tax refund, which will include your 2020 RRC, is to file electronically and have it direct deposited into your financial account. Bank accounts, many prepaid debit cards, and several mobile apps can be used for direct deposit when a routing and account number are provided. If using a prepaid debit card, check with the financial institution to ensure the card can be used and to obtain the routing number and account number, which may be different from the card number.

A Final Note

Contact your local tax professional if you need assistance determining your eligibility for any 2020 Recovery Rebate Credits.

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