You report the final amount on line 30 of your 2020 federal income tax return (Form 1040 or Form 1040-SR). The refund rebate credit is a “refundable” credit, which means that you will receive a tax refund if the credit is greater than the tax you would otherwise have to pay. (“Non-refundable” credits only reduce your tax bill to zero – they don`t trigger a refund, even if they`re higher than the amount you owe.) The eligibility rules for the recovery repayment credit are essentially the same as for the first and second rounds of retake reviews. The big difference is that eligibility for stimulus checks is usually based on the information found on your 2019 tax return (or your 2018 tax return for first-round checks), while eligibility for the refund remittance credit is based on information from your 2020 tax return. So you could qualify for a stimulus check, but not for credit – and vice versa. This helps eligible Americans who haven`t received a stimulus check or haven`t received the full amount. And in some cases, even a person who received both a $1,200 stimulus cheque in the first round and a $600 stimulus payment can claim a refund that increases their refund or reduces the tax they owe. Even if you don`t need to file a tax return for 2020, at least be sure to check if you qualify for a refund. If you do, you submit just to claim the credit and get a refund. Andrew and Becky filed a joint tax return for 2019 in March 2020 (before sending out any first-round stimulus cheques). They reported adjusted gross income of $160,000 on this return. They also have a five-year-old child.
Since Andrew was on leave for part of 2020, his AGI for 2020 was only $120,000. Since their AGI was above the exit threshold of $150,000 for joint applicants in 2019, the two stimulus cheques were reduced by $500. His first-round re-entry cheque was reduced from $2,900 (base amount of $2,400 + $500 for his child) to $2,400, while his second-round cheque was reduced from $1,800 (base amount of $1,200 + $600 for his child) to $1,300. You generally have the right to claim the collection discount if you are in 2020: Since your 2020 AGI is below the expiry threshold for joint applicants, your collection discount credit will not be reduced. As a result, the repayment credit they report on line 30 of their 2020 tax return is $1,000 after deducting the amount of their first and second stimulus payments. A person who died in 2020 can still claim the refund credit on their final tax return prepared by a surviving spouse or representative if the requirements listed above are met. Then add $1,100 for each child 16 years of age or younger who is reported as a dependant on your 2020 return. The amount of $1,100 is equal to the combined sum of $500 per child added to first-round recovery cheques and $600 per child stapled for second-round payments.
However, some groups of people could very well end up with a positive loan amount, resulting in a lower tax bill for 2020 or a larger tax refund. For example, if you qualify, you may be able to claim a refund discount credit if: In its current form, your clawback rebate is subject to set-off or garnishment if you owe tax arrears, child benefit arrears or certain other debts. Unlike recovery checks, there are no special exceptions to clearing and garnishing the loan. Congress could change the law later, and the IRS could also provide some relief. But again, the government, banks, creditors, and debt collection agencies may be able to participate in any repayment you receive on your 2020 tax return – even if the repayment is based solely on the repayment of the discount balance. For more information about the situation, see Stimulation Verification Warning: IRS may take your collection repayment credit for child support or other debts owing. See the instructions on Form 1040 for a one-page spreadsheet that you can use to calculate your balance amount. These are just a few of the most common reasons why you might be able to apply for a refund reduction credit.
There will be other situations that will lead to a positive loan amount. That`s why it`s important to run the numbers when filing your own 2020 tax return. If you are eligible for a refund, submit your return electronically and log in so that your refund is deposited directly into your bank account so that you can receive your money as quickly as possible. (NOTE: If you reside in a U.S. territory, do not enter an amount on line 30 of Form 1040 or Form 1040-SR. In general, the tax authorities of American Samoa, Guam, Puerto Rico, the United States, the Virgin Islands and the Northern Mariana Islands will credit eligible residents with the clawback discount.) There is a new tax credit that appears on Form 1040 this year: the Refund Rebate Credit. If you haven`t received a recovery cheque – or if you`ve only received a partial cheque – you should definitely make sure to check the credit before filing your 2020 tax return. After adding the base amount and an additional amount for your children, you need to determine if your clawback discount will be reduced because of your income. Your credit will be reduced – perhaps to zero – if you file as an individual taxpayer and have an adjusted gross income (GII) of more than $75,000 on your 2020 tax return. If you file a joint tax return with your spouse, your credit will begin to decrease if your AGI for 2020 is greater than $150,000. For people who apply for the status of head of household, the tax credit will be reduced if your AGI exceeds $112,500.
For every $20 you exceed the applicable threshold, your recovery discount balance will be reduced by $1. And it will all depend on what people put on line 30 of their tax form. This is the line on page 2 where you claim the “recovery repayment credit,” which is best known to distressed households as a stimulus payment. Similar to the eligibility rules, the calculation of the recovery discount credit is generally the same as that of recovery cheques, except that they are based on information from different sources. The first reminder checks were based on information from your 2018 or 2019 tax return, whichever was last filed when the IRS started processing your tax return. If you haven`t filed a tax return in either of these two years, you can send the required information to the IRS through an online portal. If you received benefits from the Social Security Administration (SSA), the Railroad Retirement Board, or the Department of Veterans Affairs (VA), the IRS received the information it needed from those other government agencies. The second-round stimulus checks were based either on your return for 2019, or on information previously obtained through the IRS online portal without a report, or on information obtained from another government agency.
However, the amount of your refund credit is based solely on the information contained in your 2020 tax return. As with recovery cheques, calculating the amount of your recovery discount balance begins with a “base amount”. For most people, the base amount is $1,800 – that`s the combined sum of the base amount of the first recovery cheque ($1,200) and the second base amount of the recovery cheque ($600). For married couples filing a 2020 joint tax return, the base amount is $3,600 (i.e., double the general base amount). The tax credit for recovery refund and recovery cheques are linked to the hip. The first ($1,200) and second ($600) stimulus cheques were simply initial loan payments. For example, if the combined amount of your two recovery cheques (i.e., advance payments) is less than the amount of the refund credit, you may be able to recover the difference on your 2020 tax return in the form of a larger tax refund or a lower tax bill.