IRS updates Recovery Rebate Credit and EIP guidance

The Internal Revenue Service added more information on the Recovery Rebate Credit, providing extra details on its Frequently Answered Questions document about finding the first Economic Impact Payment amounts to calculate the credit.

Last week the IRS updated the document as it prepares for the start of tax season on Jan. 24 (see story). On Thursday, the IRS posted a new FAQ page that delves further into the Recovery Rebate Credit.

Taxpayers who didn’t qualify for, or didn’t receive, the full amount of the third Economic Impact Payment may be able to claim the 2021 Recovery Rebate Credit based on their 2021 tax year information. Most eligible people already received their EIPs and won’t include any information about their payment when they file. However, those who are missing stimulus payments should review the information on the Recovery Rebate Credit page to determine their eligibility and whether they need to claim a Recovery Rebate Credit for tax year 2021.

To claim any remaining credit for 2021, eligible people need to file a 2021 tax return, even if they usually don’t file taxes. Also, those who didn’t receive all of their first and second Economic Impact Payments in 2020 can get those amounts only by filing a 2020 tax return (or amending a previously filed return) and claiming the 2020 Recovery Rebate Credit. To determine their eligibility, they should review the Recovery Rebate Credit page.

The Recovery Rebate Credit for 2021 can reduce any taxes owed or be included in the tax refund for the 2021 tax year. Filers need to ensure they don’t mix information from tax years 2020 and 2021. They should be especially careful not to include any information regarding the first and second Economic Impact Payments received in 2020, or the 2020 Recovery Rebate Credit, on their 2021 return. They will need the total of the third payment received to accurately compute the 2021 Recovery Rebate Credit when they file their 2021 federal tax return in 2022.

They can locate this information on Letter 1444-C, which they should have received from the IRS during 2021 after each payment, along with Letter 6475, which the IRS will mail to them starting in late January. They can also view this information in their online account later in January.

The FAQs cover most questions relating to claiming the credit and are for use by taxpayers and tax professionals and are being issued as quickly as possible.

The 2021 Recovery Rebate FAQ topics include:

• Topic A: General Information;
• Topic B: Claiming the Recovery Rebate Credit if you aren’t required to file a 2021 tax return;
• Topic C: Eligibility for claiming a Recovery Rebate Credit on a 2021 tax return;
• Topic D: Claiming the 2021 Recovery Rebate Credit;
• Topic E: Calculating the 2021 Recovery Rebate Credit;
• Topic F: Receiving the Credit on a 2021 tax return;
• Topic G: Finding the third Economic Impact Payment Amounts to calculate the 2021 Recovery Rebate Credit; and
• Topic H: Correcting issues after the 2021 tax return is filed.