For tax year 2021, your clients may be eligible to claim the Recovery Rebate Credit on their tax returns. This credit is available for clients who didn't previously receive the full third economic impact payment, sometimes referred to as EIP 3 or stimulus, that they were entitled to under the American Rescue Plan Act. These payments were issued between March and December 31st of 2021.
How do I enter stimulus payments or generate the credit in my program?
Click on your program to view instructions:
What if my client isn’t sure how much stimulus they received?
Use Letter 6475 to confirm the amount of EIP 3 and plus-up payment your client received. The IRS will send Letter 6475 in early 2022 to taxpayers who received EIP 3.
Additionally, you can refer to Notice 1444-C. The IRS sent this notice to taxpayers who received EIP 3 - the only economic impact statement issued in 2021. If your client didn’t keep the notice, 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 can't confirm the exact amount of payment received, enter your best estimate. The IRS will confirm and adjust any Recovery Rebate Credit amounts before issuing the credit.
How is the Recovery Rebate Credit calculated?
The Recovery Rebate Credit amount is figured just like the third economic impact (stimulus) payment, except that it uses your client's tax year 2021 information to determine eligibility and the amount, rather than prior year returns.
The credit will be reported on Form 1040, Schedule 3, line 30. The Recovery Rebate Credit amount, if any, is calculated using the Recovery Rebate Credit Worksheet - Line 30 found in the IRS Instructions for Form 1040.
Who qualifies for the Recovery Rebate Credit?
Generally, your clients are eligible for the credit if in 2021 they were a U.S. citizen or resident alien, weren't a dependent of another taxpayer, and have a valid social security number. This includes taxpayers who died in 2021.
The credit begins to phase out if your client's AGI is above the following threshold for their filing status:
- $150,000 for married filing joint or qualifying widow(er)
- $112,500 for head of household
- $75,000 for single or married filing separately
Your program will take these and other eligibility requirements into account when calculating the credit. For details on additional situations, see the IRS Recovery Rebate Credit Eligibility FAQ.
Are stimulus payments taxable?
Generally, stimulus or economic impact payments your client received aren’t includible in gross income, and thus are not taxable; but they will reduce the amount of any Recovery Rebate Credit you can claim. Learn more >
What if my client received too much stimulus?
If your client received a greater amount of EIP based on their prior year tax information than the amount of Recovery Rebate Credit they qualify for, no action is needed. Learn more >
If your client believes they received a stimulus payment in error, or wishes to return their EIP for another reason, follow these instructions.
Where can I get more info about economic impact payments?
See the IRS Questions and Answers about Economic Impact Payments to learn more about who qualifies, payment amounts, and how payments are issued.
What about the first and second round of stimulus checks?
The first two economic impact payments were issued before March 1st, 2021, and do not affect your clients' 2021 tax returns or credit amount.
If your client didn't receive the full amount of EIP 1 and 2 they were entitled to, they can still claim the Recovery Rebate Credit on a 2020 tax return. These economic impact payments were issued between April 2020 and February 28th, 2021.
How is the 2020 Recovery Rebate Credit calculated?
The Recovery Rebate Credit amount is figured just like the first and second economic impact (stimulus) payments, except that it uses your client's tax year 2020 information to determine eligibility and the amount, rather than prior year returns.
The credit will be reported on Form 1040, line 30. The Recovery Rebate Credit amount, if any, is calculated using the Recovery Rebate Credit Worksheet - Line 30 found in the IRS Instructions for Form 1040.
Who qualifies for the 2020 Recovery Rebate Credit?
Generally, your clients are eligible for the credit if in 2020 they were a U.S. citizen or resident alien, weren't a dependent of another taxpayer, and have a valid social security number. This includes taxpayers who died in 2020.
If your client's adjusted gross income (AGI) is above the threshold for their filing status, the credit will be reduced by 5% of the amount by which their AGI exceeds the threshold amount.
- $150,000 for married filing joint or qualifying widow(er)
- $112,500 for head of household
- $75,000 for single or married filing separately
Your program will take these and other eligibility requirements into account when calculating the credit. For details on additional situations, see the IRS Recovery Rebate Credit Eligibility FAQ.
