This article will help you generate or suppress the Recovery Rebate Credit, understand how Lacerte handles the credit, and resolve diagnostic reference #54547. For answers to frequently asked questions about the Recovery Rebate Credit and economic impact payments (also referred to as EIP or stimulus), click here.
To generate or suppress the Recovery Rebate Credit:
- Go to Screen 38.2 Recovery Rebate, EIC, Residential Energy, Other Credits.
- Locate the Recovery Rebate Credit section at the top of this screen.
- Enter the amount of Economic impact payment 1 received.
- Enter the amount of Economic impact payment 2 received.
Enter a negative one (-1) in these fields to indicate no stimulus payment was received. The credit will not generate until you make an entry for both EIP 1 and EIP 2.
Economic impact payments for dependents
Enter the economic impact payments the IRS issued to the taxpayer (and spouse, if applicable) here. This includes any increased EIP the taxpayer received for qualifying children based off prior year tax filings (typically $500 for EIP 1, and $600 for EIP 2).
Taxpayers who didn't receive any EIP because they were claimed as a dependent in prior years, and who were no longer dependents in 2020, may be able to claim a Recovery Rebate Credit. These taxpayers should not enter any EIP amounts that were received by another individual. Enter -1 to indicate none.
Returns with deceased individuals
Taxpayers who died on or after January 1, 2020, are considered eligible for the full amount of Recovery Rebate Credit. This includes taxpayers who died in 2020 and 2021. These individuals may have received no EIP, only EIP 1, or both rounds of EIP.
Regardless of an individual's date of death, they may still claim the Recovery Rebate Credit if they did not receive the full amount of EIP 1 and EIP 2 and they meet the other requirements for the credit.
Enter the amount(s) of EIP 1 and EIP 2 received by the deceased individual that weren't returned to the IRS. Enter -1 to indicate none if no payment was received, or if the payment was received but then returned to the IRS.
Using the Taxpayer and Spouse columns
On married filing joint returns, you can enter the taxpayer and spouse EIP amounts separately to control who the payments are assigned to on the MFJ/MFS comparison worksheet and if you decide to split the joint return. Using the separate columns doesn't impact the credit computation.
For payment amounts attributable to a dependent, enter them in the column of the person claiming the dependent this year as noted on Screen 2 Dependents.
What if my client isn’t sure how much stimulus they received?
Refer to Notice 1444 and Notice 1444-B. The IRS sent these notices to taxpayers who received EIP 1 and EIP 2, respectively. If your client didn’t keep the notices, they may need to review their bank statements (for records of direct deposit payments or deposited checks), or view past notices at IRS.gov/account. If you are unable to confirm the exact amount of the payment received it is best to enter your best estimate. The IRS will confirm and adjust any Recovery Rebate Credit amounts before issuing the credit.
Diagnostic ref. 54547
If you don’t make any entries on screen 38.2, the following e-file critical diagnostic may generate:
This return may be eligible for the Recovery Rebate Credit. An entry must be made in “Economic impact payment 1 received as shown on Notice 1444 (enter -1 if zero)” and “Economic impact payment 2 received as shown on Notice 1444-B (enter -1 if zero)”. (ref. #54547)
This diagnostic will generate when your client meets the general eligibility requirements for the credit, but the credit is not being carried to Form 1040 since EIP amounts are not yet entered. Follow the steps above to complete screen 38.2 and clear the diagnostic.