2020 RRC and EIP 1 and 2

The Coronavirus Aid, Relief, and Economic Security (CARES) Act established Internal Revenue Code (IRC) section 6428, 2020 Recovery Rebates for Individuals, which can be claimed on tax year 2020 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors.

The law also provided for an advanced payment of the Recovery Rebate Credit (RRC) in calendar year 2020. These payments were referred to as Economic Impact Payments (EIP1s). IRC section 6428(f)(3) provides that EIP1s cannot be made or allowed after Dec. 31, 2020. The IRS deadline for individuals to register for an EIP1 was Nov. 21, 2020. Therefore, beginning Jan. 1, 2021, taxpayers who did not receive an EIP1 during 2020 or received an amount less than the amount to which they are entitled can claim the RRC on tax year 2020 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors.

In December 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 became law, allowing a second round of advanced payments (EIP2). The EIP2 initial direct deposit payments began on December 29, 2020 with official payment date of January 4, 2021. The IRS began mailing paper checks on December 30, 2020. There was no action required by eligible individuals to receive this second payment, unlike some taxpayers who had to take action under the first EIP process.

In order to claim the 2020 RRC for any additional amount a taxpayer is entitled to but did not receive as an advanced payment, both EIP1 and EIP2 need to be reported on the Recovery Rebate Credit Worksheet contained in the 2020 Form 1040 and Form 1040-SR instructions.

More information can be found below about the:

2020 Recovery Rebate Credit

The 2020 Recovery Rebate Credit (RRC) is established under the CARES Act. If you didn’t receive the full amount of the recovery rebate credit as EIPs, you may be able to claim the RRC on your 2020 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors.

The eligibility criteria for the RRC is generally the same as for EIPs, except that the RRC is based on tax year 2020 information, instead of the tax year 2019 or tax year 2018 information used for EIP1 and tax year 2019 information used for EIP2.

(Note: the 2020 versions of these tax forms can be located on the IRS Forms and Publications site or through the Electronic Filing Options for Individuals page.)

RRC issues after the 2020 tax return is filed

The IRS mailed letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected. 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, the credit will be reduced by the amount of any EIPs already issued to the taxpayer.

If there’s a mistake with the credit amount on Line 30 of the Form 1040 or Form 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 letter or notice saying the IRS changed the amount of their 2020 credit should read the letter or notice. Then they should review their 2020 tax return, the requirements for the credit and the worksheet in the Form 1040 and Form 1040-SR instructions.

If you believe the amount is incorrect after receiving an IRS letter or notice and checking the 2020 eligibility rules and calculation, see 2020 Recovery Rebate Credit — Topic G: Correcting issues after the 2020 tax return is filed, which provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter or notice as well as the questions and answers for what information they should have available when contacting the IRS.

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

Generally, this credit will increase the amount of your tax refund or lower the amount of the tax you owe. The EIPs paid during 2020 or during January 2021 are not taxable to you for federal income tax purposes, but because they are an advance payment of the RRC, they will reduce any RRC that you can claim on your 2020 Form 1040 or 1040-SR.

You do not need to complete any information about the RRC on your 2020 Form 1040 or Form 1040-SR if you already received the correct amounts of EIP1 and EIP2 to which you are entitled.

If you are claiming the RRC because you did not receive either EIP or did not get the full amount, you have to file a 2020 individual income tax return on Form 1040 or Form 1040-SR in 2021, even if you don’t have a filing obligation. If you received Notice 1444 or Notice 1444-B for one or both rounds of the EIPs, keep them for your 2020 tax records. You’ll need the amount of the payment(s) in the notice(s) when you file in 2021.

See the IRS Form 1040 for tax year 2020 and the corresponding 1040 and 1040-SR Instructions for more information.

How do I get my 2020 Recovery Rebate Credit?

If you already received the full amount of your RRC via the first round or second rounds of EIPs, you don’t need to take any action.

You may be able to claim the RRC only if EIPs received are less than the amount of the RRC to which you are eligible. This happens when:

You don’t qualify for the RRC if, for EIP1:

Claim the RRC on your 2020 Form 1040, Individual Income Tax or Form 1040-SR, U.S. Tax Return for Seniors. The 2020 Form 1040 instructions will include a worksheet you can use to figure the amount of any RRC for which you are eligible. For more details about claiming this credit, visit the Recovery Rebate Credit page on IRS.gov or follow the form’s instructions.

(Note: the 2020 versions of these tax forms can be located on the IRS Forms and Publications site or through the Electronic Filing Options for Individuals page.)

2020 Economic Impact Payment Information

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) legislation allows a first round of Economic Impact Payments, distributed during calendar year 2020 before December 31, by the Internal Revenue Service as an advance payment of the Recovery Rebate Credit (RRC). These payments were automatically issued, except for taxpayers who normally are not required to file a tax return. Taxpayers who normally are not required to file were given the opportunity through November 21, 2020, to either file a simplified tax return or used a special Non-Filers: Enter Payment Info Here tool to claim a payment.

This round of EIPs for taxpayers with existing direct deposit information on file began the week of April 13, 2020, and in most instances, payments continued to be issued until December 31, 2020.

The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 allows for an additional second round of EIP payments (EIP2). These payments were available starting January 4, 2021, and were issued until mid-January.

EIP2 payments were also automatic for eligible taxpayers who filed a 2019 tax return, those who receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits as well as Supplemental Security Income (SSI), and Veterans Affairs beneficiaries who didn’t file a tax return. Payments were also automatic for anyone who successfully registered for the first EIP online at IRS.gov using the agency’s Non-Filers tool by November 21, 2020, or who submitted a simplified tax return that had been processed by the IRS.

Who Is Eligible and For What Amount?

First Round of EIPs (April to December 2020)

Based on the 2018 or 2019 tax return information, eligible taxpayers could qualify for up to $1,200 each, or up to $2,400 if married filing jointly, and up to $500 for each qualifying child.

A qualifying child is one claimed as a dependent on the last filed tax return, tax year 2019 or tax year 2018, and who won’t reach age 17 by Dec. 31, 2020. This is the same criteria used to determine eligibility for the Child Tax Credit.

The gross amount, based on either the 2018 or 2019 tax returns, of the payment is reduced by $5 for each $100 earned above $75,000 for single filers, $112,500 for head of household filers and $150,000 for married filing joint filers. Single filers with income exceeding $99,000, $136,500 for head of household filers and $198,000 for joint filers with no qualifying children aren’t eligible and won’t receive payments.

Second Round of EIPs (January 2021)

Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment of up to $600 for individuals or $1,200 for married couples filing jointly and up to $600 for each qualifying child.

Similar to the first EIP, but based on the 2019 tax return, if you have adjusted gross income not exceeding $75,000 for individuals, $112,500 for taxpayers filing as head of household, or $150,000 for married couples filing joint returns and surviving spouses, you will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced by 5 percent of the amount by which the adjusted gross income exceeds the applicable threshold mentioned above.

Who Isn’t Eligible

Ineligible taxpayers include:

Taxpayers residing in American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands.

In general, the tax authorities in these five U.S. territories will provide the Recovery Rebate Credit (RRC) to eligible residents. Territory residents should direct questions about EIPs received in 2020, January 2021, or the 2020 RRC to the tax authorities in the territories where they reside.