The recovery rebate credit helps people claim any stimulus check money they were entitled to but missed out on for various reasons. The 3rd round of stimulus payments went out starting March 2021 immediately after the American Rescue Plan Act bill was signed into law by President Biden after he assumed office. Many citizens filed the RRC claim along with the 2021 income tax returns as they felt the IRS owed them money. But most are discovering that their claim was not valid.
The RRC is a refundable tax credit that was claimed by filers on their 2021 income tax returns if they did not receive their third stimulus check, or if they felt that the amount was less than they were eligible for.
It was technically an advance over the 2021 tax credit. As the IRS had no access to the 2021 tax information when the advance payments were dispatched, the agency had to rely on past information such as the 2020 or 2019 returns to determine the stimulus check amount, and the number of dependents who were claimed and other relevant information.
Eligibility For The Recovery Rebate Credit
According to the IRS, people who received the third stimulus check and other related payments but missed out on a part of the amount for various reasons were eligible for the RRC. The same goes for people who missed out on the third stimulus check.
People missed the correct amount of the stimulus check for various reasons including the birth of a child in 2021, a change in marital status, and a fall in AGI in 2021.
As the stimulus check was calculated based on the 2019 or 2020 returns, a fall in income in 2021 qualified you for an additional amount in your stimulus check. People who received their Social Security number in 2021, are freshly qualified for the third stimulus check.
Claiming The Recovery Rebate Credit
Tax filers who feel that they are entitled to a bigger check than what they received under the Economic Impact Payment should first calculate the amount they were eligible for and arrive at the difference between what they received and what is owed.
Filers can take the help of the online account of the IRS, or request an IRS transcript for details of the Economic Impact Payment. They should also receive Letter 6475 ( sent in 2022) and Notice 1444-C (sent immediately after the 3rd payment was distributed). These physical notices sent by the IRS to the registered address of the taxpayers detail the total amount that was dispersed.
If tax filers feel that they are eligible for more amount after calculations. They can claim it on line 30 of Form 1040 on their returns for 2021.
IRS Reveal That Third Stimulus Check Amount Correct In Most Cases
The IRS has revealed figures to claim that they correctly calculated the eligibility of taxpayers for a recovery rebate credit in the 2021 filing season accurately 99.3% of the time. But even the 0.7% rate of error involves millions of filers and hundreds of millions of dollars in improper allowances of the credit. There is numerous instance where individuals should have received a greater amount or a recovery rebate credit amount but missed out for various reasons.
The Treasury Inspector General for Tax Administration (TIGTA) reported that the IRS accurately calculated the RRC allowable for 26.1M of the 26.3M tax returns that filed an RRC claim. The testing conducted by TIGTA has identified 181,743 returns where various issues resulted in incorrect RRC being dispatched to taxpayers. This included errors due to error programming by the IRS (11,797 returns), error resolution function tax examiner (167,130 returns), and issues linked to timing (2,816 returns).
Additionally, 355,015 potentially unentitled individuals were also issued the Recovery Rebate Credit erroneously. They include ineligible dependents, individuals associated with credit from any US territory, and nonresidents. The authorities have also identified around 10M potentially eligible individuals who are yet to receive an RRC as of May.
Moreover, the debit card policies and the resolution to go for manual verification of RRC claims by tax filers unnecessarily burdened them and slowed down the process of accessing the stimulus checks for many taxpayers.
Helping Fix The Issue
The Internal Revenue Service last year mailed Notice 1444-C showing the amount issued as a third stimulus check. Along with Letter 6475, they helped filers find out the stimulus check amount they received. Couples filing joint returns received two sets.
Filers who received the correct stimulus check amount were not supposed to claim additional money in Line 30. For those who claimed the RRC on their income tax returns, the IRS has informed them that it would calculate the right credit amount for the 2021 tax year if there had been an error.
Under this process, the tax authorities will do the necessary correction to the returns and carry on processing them. The filer will get a notice detailing the change, entailing additional delays. If the filers approve the findings by the IRS, no further action is necessary. Filers who feel that they are entitled to a bigger check can call the listed free number on the top corner of the notice.
Filers have 60 days to file a calculation error. If the authorities agree to the change in the amount calculated under the RRC, the IRS will send a refund, the status of which can be checked through the original income tax return using the ‘Where’s My Refund’ facility at the IRS.gov website.
Most of the time, the IRS correctly calculates the Recovery Rebate Credit adjustments. The IRS has revealed that in most instances there is a genuine reason the IRS adjusted the refunds, as records with the IRS indicate a payment.
But through a payment trace, there have been numerous instances where payments that were pending to taxpayers have been identified. Moreover, taxpayers who have received any amount have assured the knowledge that their refunds have been correctly adjusted by the IRS.
In case of any doubt, the IRS has requested a transcript that reveals the actual record. This can be done by any individual by signing into the IRS online account.