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If your stimulus payment came in below what you expected, you may get a second shot at claiming the money when you file your 2020 tax return.
In the waning days of 2020, the federal government began sending out its second round of stimulus checks to millions of Americans. These payments are worth up to $600 for individuals.
The rollout has already met speed bumps: For instance, people who’ve changed banks may not get their money right away.
Rather than reissue those second payments to households, the IRS is recommending that people file their 2020 returns electronically and claim a recovery rebate credit, according to an updated set of “frequently asked questions” from the agency.
The recovery rebate credit is a new addition to the federal income tax return. Filers who didn’t receive the full amount of stimulus they’re entitled to can claim it here.
In general, this credit will lower the amount of tax you owe or it will boost your tax refund for 2020.
“If you didn’t get the full payment, you’ll need to claim the credit,” said Dina Pyron, global TaxChat leader at Ernst & Young.
“If you were overpaid on the payment, you get to keep it – and there’s no tax or clawback,” she said. “If you were underpaid on the stimulus, claim that credit and get the money back.”
Three scenarios for calculating the credit
The amount of money in your stimulus payment – be it the first or second round – depends on your adjusted gross income.
Single filers with an AGI of up to $75,000 or married couples filing jointly with up to $150,000 of AGI were eligible for the full payment.
The catch is that the IRS considered the 2018 or 2019 tax years when calculating the first round of stimulus. The agency used 2019’s returns to hash out the second round.
Your circumstances might have changed significantly since then, said Kathy Pickering, leader of The Tax Institute at H&R Block. She pointed to three scenarios in which taxpayers will want to crunch the numbers for the recovery rebate credit.
Changes in your family. If you had a baby last year, the IRS might not know about it – and you could be entitled to more stimulus money. Similarly, young adults who are no longer dependents and will be filing their taxes for the first time may qualify for the credit.
Falling income in 2020. You might have had higher income in 2019, which led to smaller stimulus payments in 2020. If your income fell last year, you might be eligible for more money through the credit.
You didn’t get your payment at all. Whether you had a processing problem and your check went to a shuttered bank account or you moved and missed the check, you’ll want to apply for the credit.
Keep your records
You might recall receiving a letter from the IRS last year, numbered Notice 1444, spelling out how much you received in your stimulus payment.
If you don’t, you’re not alone.
Many recipients may have tossed the letter in the trash, which can make things complicated because you’ll need it to figure out the credit, tax professionals said.
“One of the problems that we’ll run into when we’re preparing these returns is that we’re going to rely on clients to tell us this is how much they received or didn’t get,” said Steven Fafel, CPA at Leonard Fafel CPA, PC in Salem, Massachusetts.
“Many people may have thrown those away – that’s where it’s going to get tricky,” he said. “Did they get those payments in actuality so that we’re not double-counting them?”
For now, the best thing those recipients can do is dig up their checking account history to see when they received the deposit and maintain a record of the payment for tax time.
As tax time approaches, taxpayers who don’t have the notices may have to start an account on the IRS website in order to check the amount they received, according to Henry Grzes, lead manager for tax practice and ethics at the American Institute of CPAs.
