If you didn’t get the full amount of the third Economic Impact Payment, you may be eligible to claim the 2021 Recovery Rebate Credit and must file a 2021 tax return – even if you don’t usually file taxes – to claim it. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund.
Q: How does the 2021 Recovery Rebate Credit differ from the 2020 Recovery Rebate Credit?
A: 2020 Recovery Rebate Credit: The first two rounds of Economic Impact Payments were advance payments of 2020 Recovery Rebate Credits claimed on a 2020 tax return. The IRS issued the first and second rounds of Economic Impact Payments in 2020 and in early 2021.
2021 Recovery Rebate Credit: The third round of Economic Impact Payments, including the plus-up payments, were advance payments of the 2021 Recovery Rebate Credit claimed on a 2021 tax return. The IRS began issuing the third round of Economic Impact Payments in March 2021 and continued through December 2021. In addition, the third payments differ from the earlier payments in several respects:
- Payment amounts are different. The maximum credit is $1,400 per person, including all qualifying dependents claimed on a tax return. Typically, this means a single person with no dependents will have a maximum credit of $1,400, while married taxpayers who file a joint return that claims two qualifying dependents will have a maximum credit of $5,600.
- Qualifying dependents expanded. Unlike the 2020 Recovery Rebate Credits and first two rounds of Economic Impact Payments, the 2021 Recovery Rebate Credit and third round of Economic Impact Payments include additional amounts for all dependents, not just children under 17. Eligible individuals will get up to $1,400 for each qualifying dependent claimed on their return, including older relatives like college students, adults with disabilities, parents, and grandparents.
- Income thresholds changed. The credit amount begins to be reduced at the same income thresholds as the 2020 Recovery Rebate Credits, for example with adjusted gross income of more than $75,000 if filing as single or $150,000 if filing as married filing jointly. However, the 2021 Recovery Rebate Credit amount is fully reduced to $0 more quickly. For example, individuals can’t claim any credit with adjusted gross income of $80,000 or more if filing as single or $160,000 or more for if filing as married filing jointly. Due to these new income limitations, some individuals won’t be eligible to claim the 2021 Recovery Rebate Credit even if they received a 2020 stimulus payment.
Q: What were Plus-Up Payments?
A: Some eligible individuals received more than one third Economic Impact Payment. The IRS sent additional or plus-up payments to people who:
- Received a third Economic Impact Payment based on a 2019 tax return or information received from the Social Security Administration, Railroad Retirement Board, or the Department of Veterans Affairs, and
- Filed a 2020 tax return which allowed a greater third Economic Impact Payment but only if the 2020 return was processed by Dec 1, 2021.
For example, you may have gotten a plus-up payment if your income was less in 2020 compared to 2019 or you added a dependent on your 2020 return.
The IRS automatically evaluated your eligibility for plus-up payments after they processed your 2020 return. The IRS sent plus-up payments separately from your 2020 tax refund and previous Economic Impact Payments. They issued weekly plus-up payments to eligible taxpayers until December 31, 2021, the deadline set by law to make Economic Impact Payments. Individuals who did not receive the full amount of the third Economic Impact Payment, including the plus-up payments, may be eligible to claim the 2021 Recovery Rebate Credit on their 2021 tax return.
Q: Will I receive a letter or notice from the IRS about the third Economic Impact Payment?
A: Yes, the IRS mailed Notice 1444-C, Your Third Economic Impact Payment, at the address they had on file for you. The IRS sent separate letters to people who received a plus-up payment.
The IRS will send Letter 6475, Your 2021 Economic Impact Payment(s), in early 2022 to confirm the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021.
Please keep any IRS notices/letters you receive related to the third round of Economic Impact Payments with your tax records and refer to it when you file your 2021 tax return.
Q: I used the Non-Filers tool last year and don’t usually file a tax return. What should I do to claim a 2021 Recovery Rebate Credit?
A: If you’re eligible – and either didn’t qualify for a third Economic Impact Payment or got less than the full amount – you’ll need to file a 2021 tax return to claim the Recovery Rebate Credit even if you otherwise are not required to file a tax return. The best way to file a complete and accurate 2021 tax return is to file electronically. Your CPA or the tax preparation software will ask questions about your income, credits and deductions and will help you figure your 2021 Recovery Rebate Credit.
Please Note: Avoid processing delays that can slow your refund by filing a complete and accurate tax return. You will need the total amount of your third Economic Impact payment and any plus-up payments to claim the 2021 Recovery Rebate Credit, which you can find in your Online Account. Any third Economic Impact Payments you received will reduce the amount of the credit you claim on your tax return. If the information on your return is not accurate it will delay the processing of your return.