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Claiming the recovery rebate credit on 2020 individual returns

Individuals who were eligible for an economic impact payment but did not receive one, or were eligible for a larger payment than they received, may be able to claim a recovery rebate credit when they file their income tax return for 2020.

The economic impact payments and rebate recovery credit were authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  All eligible individuals are entitled to a first payment or credit of up to $1,200 for individuals. Eligible individuals also receive $500 for each qualifying child.  The second payment is $600 per taxpayer or dependent.

To claim a recovery rebate credit, taxpayers will need to reconcile their economic impact payment with any recovery rebate credit amount for which they are eligible on their 2020 Form 1040, U.S. Individual Income Tax Return. The credit will be added to any refund or reduce any tax due on the 2020 individual return.

Common reasons why taxpayers may claim a recovery rebate credit include reduced income in 2020, a change in marital filing status, a change in the number of dependents, and not having received an economic impact payment for which they were eligible. The latter reason may occur where an individual had no filing requirement in 2018 or 2019 and did not request a payment.

The economic impact payment is not taxable income to the recipient.

If taxpayers do not know the amount of the economic impact payment they received, they can request their 2020 tax transcript from the IRS online or by mail to the address of record. Details are available at www.irs.gov.

The IRS’s FAQs expand on criteria for persons who are eligible for economic impact payments.  The FAQs also list classes of individuals ineligible for the payment altogether. These include persons who can be claimed as a dependent on someone else’s return, including children; students over age 17 who can be claimed as a dependent on a parent’s return; and dependent adults claimed by another person. Other ineligible classes are persons without a Social Security number (SSN).

The IRS updates frequently asked questions (FAQs) on its Economic Impact Payment Information Center webpage, available at www.irs.gov.

Please feel free to contact Grant Thornton Israel  directly for assistance with this issue and for your US tax filings, ariel.katz@il.gt.com or 03 710 6644