And later this year, the IRS will send "Notice 1444-C, Your 2021 Economic Impact Payment." The IRS will mail letters to people who received a third Economic Impact Payment and you should keep this letter with your 2021 tax records.
When it comes to the Economic Impact Payments, money could have been sent via direct deposit, a paper check in the mail or a prepaid Visa debit card issued by MetaBank and sent in the mail. And yes, if it was lost somehow, the IRS has a method for tracing the money.
Also the IRS notes that taxpayers who didn’t save or didn’t receive an IRS letter or notice can research their individual tax information through an IRS online account. See www.irs.gov and "View Your Account Information."
What is the Recovery Rebate Credit?
The Recovery Rebate Credit isn't a new bunch of money. It isn't to be used for the third stimulus payments, which began being issued in March, either.
The IRS notes that the first and second Economic Impact Payments were technically advance payments of the 2020 Recovery Rebate Credit.
Why should we be surprised, though, that so many people are confused. Most people refer to the money as stimulus cash, not an Economic Impact Payment.
Where exactly a Recovery Rebate Credit fits into the tax picture remains perplexing.
If you've receive the full amount for your first and second Economic Impact Payments, you should not state those amounts on your tax return. You don't need to take any action.
But someone who didn’t receive a first or second stimulus payment — and qualifies for a payment — would need to claim the Recovery Rebate Credit on the 2020 tax return to get stimulus money.
That's also true if you received less than the full amount of stimulus that you're eligible for the 2020 credit.
Taxpayers will need to file a 2020 federal income tax return to claim the Recovery Rebate Credit if they didn't get the money or they received less money than they're eligible to get, such as if a child's stimulus wasn't included in the payout. That's true even if you don’t usually file a tax return.
The IRS is going to review your 2020 income and household situation to determine the amount of any credit you'd be owed. Again, the credit would be reduced by any Economic Impact Payment money that was previously issued to you.
When it comes to the Recovery Rebate Credit, the IRS isn't cutting you a stimulus check. Instead, if eligible, the IRS would put that credit toward any tax debt you owe in 2020 or toward your total income tax refund for 2020.
Not to confuse the matter further, but this latest, third round of stimulus payments is not addressed on your 2020 income tax returns.
But if you filed a 2020 return already, the IRS could make some adjustments to the third Economic Impact Payment issued to you in mid-March or later. And you could be sent extra money.
The IRS is issuing what it calls “plus-up” payments weekly going forward, as the IRS continues processing tax returns.©2021 Detroit Free Press. Distributed by Tribune Content Agency, LLC.