Now that the 2020 tax season has begun, many are wondering about their eligibility for the Recovery Rebate Credit.

This credit works much like any other IRS refundable credits such as additional child tax credit. Any taxpayer who was eligible for the stimulus payment but did not receive it, can now claim the payment as a credit on the 2020 tax return. There is a specific worksheet included in the 2020 return to allow taxpayers to easily calculate the amount they are due. One can claim a full or partial payment depending on what was received. You simply need to inform the IRS of the amount you received and the remaining payment due. The IRS will then determine your eligibility for the claim and send you the payment.

What happens if you claim the payment and are not eligible? Or if you claim more than you are eligible for? In that case, the IRS will recalculate your payment due and then send you a letter to explain their changes to your return. It is therefore important to know the amount you received and to input the information correctly on the return. 

Many taxpayers however, did not receive their payments at all for different reasons. We will describe various categories of taxpayers below.

• Any taxpayer who earned above a certain threshold received a reduced payments or none at all, depending on their adjusted gross income amount. If this same taxpayer earned below that threshold in 2020, they can now claim the remaining portion of the credit since eligibility will be based on the 2020 return for the Recovery Rebate Credit.

Please note that if the opposite scenario is true and one is no longer eligible in 2020, the IRS will not demand the payment to be returned. The reason being that the Economic Impact Payment, commonly referred to as the stimulus payment, is in reality a credit that was put on the 2020 tax year. However, the US government began to distribute it as a ‘prepayment’ based on the 2018 or 2019 tax returns. The IRS state that they will not demand the return of the prepayment, even if the person is no longer eligible for the credit in 2020.

• Taxpayers who file a joint return with a non-US spouse did not receive the first stimulus payment. This was due to a clause that excluded this category of taxpayers from receiving the payment. Now that that law was reversed, the payment can be claimed on the 2020 tax return.

• A dependent could not claim the payment in 2019. If in 2020, one is no longer classified as a dependent, one has the option of filing a 2020 tax return to claim the credit.

• Many checks that were issued by the IRS were not actually received. One can check the status of the payments on www.irs.gov where there is a status update available for both the first and second stimulus payments. If the check was issued and not received, a check trace needs to be done. Once the check trace is completed, and the IRS determine that the check was not cashed they will credit that amount to the taxpayers account and it can be claimed on the 2020 tax return. Filing the return before a check trace is complete is not an issue, one would need to claim the payment on the return and would only receive it once the check trace has been completed. Failure to claim the payment in such a case could mean losing out on the credit altogether.

The IRS are constantly updating their policies and information on the topic and it is worthwhile to be aware of the changes to ensure receipt of the payments in the fastest and most efficient manner. FAQ’s on www.irs.gov are updated periodically and are a great tool for receiving the latest information.