This year taxpayers may get an Economic Recovery Credit when they file their returns. Will you?
There have been two rounds of stimulus checks sent to taxpayers. Those were based on tax returns filed for either 2018 or 2019, the last return filed by the taxpayer before the stimulus payments were sent. The maximum amounts paid were $1,200 per individual, $500 for a qualifying child, and then $600 for an individual, $600 per qualifying child. Those maximum payments were phased out as income increased.
The actual stimulus payment to which a taxpayer is entitled is based on the 2020 tax return information. Therefore, a taxpayer who did not receive the maximum stimulus payment but who, based on the 2020 return, was entitled to a larger payment, will get some amount of Recovery Rebate Credit. It is very important to notify your tax preparer if you did not receive the full amount in either round of stimulus checks to see whether this credit applies to you. Bear in mind that to claim the credit you must have a social security number, not be eligible to be claimed as a dependent on another taxpayer’s return, and not be a non-resident alien.
What if you got a stimulus check and, based on your 2020 return, you would not have been eligible to receive one? The very good news is that you don’t have to give it back!