Why Some 2020 Recovery Rebate Tax Credits May Be Different Than Expected

As people across the country file their 2020 tax returns, some are claiming the 2020 Recovery Rebate Credit (RRC). The IRS is mailing letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected.

It’s important to remember that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and shouldn’t or don’t need to include this information on their 2020 tax return.

People who didn’t receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. They must file a 2020 tax return to claim the credit, even if they don’t usually file a tax return.

When the IRS processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer’s credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, it will be reduced by the amount of any EIPs already issued to them.

If there’s a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return and the IRS will send the taxpayer a letter or notice explaining any change.

Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should read the notice. Then they should review their 2020 tax return, the requirements and the worksheet in the Form 1040 and Form 1040-SR instructions.

Here are some common reasons the IRS corrected the credit:

The individual was claimed as a dependent on another person’s 2020 tax return.
The individual did not provide a Social Security number valid for employment.
The qualifying child was age 17 or older on Jan. 1, 2020.
Math errors relating to calculating adjusted gross income and any EIPs already received.

IRS.gov has a special section – Correcting Recovery Rebate Credit issues after the 2020 tax return is filed – that provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter as well as the questions and answers for what information they should have available when contacting the IRS.

The Internal Revenue Service urges people who have not yet filed their 2020 tax return to properly determine their eligibility for the 2020 before they file their 2020 tax returns. To calculate any credit due, start with the amount of any EIPs received. Use the RRC Worksheet or tax preparation software. Taxpayers who didn’t save or didn’t receive an IRS letter or notice can securely access their individual tax information with an IRS online account.

Anyone with income of $72,000 or less can file their Federal tax return electronically for free through the IRS Free File Program. The fastest way to get a tax refund which will include your 2020 RRC is to file electronically and have it direct deposited into their financial account. Bank accounts, many prepaid debit cards and several mobile apps can be used for direct deposit when a routing and account number are provided. If using a prepaid debit card, check with the financial institution to ensure the card can be used and to obtain the routing number and account number, which may be different from the card number.

For more information, visit IRS.gov.RRC and the frequently asked questions by topic.