The coronavirus pandemic has had a devastating economic impact on the U.S. economy. To help support struggling individuals and families, the federal government created a stimulus credit, known as the $1,200 economic relief payment. This payment is a one-time, direct payment of up to $1,200 per eligible adult and up to $500 for each eligible dependent. The federal government also set up a program to supplement that payment with an additional up to $14,000 of stimulus credit available for eligible taxpayers. The credits are known as the Recovery Rebate Credit (RRC), and it can be claimed in 2020 for additional funds for those who experienced financial hardship due to the COVID-19 pandemic. In addition, the IRS also recently released additional funds, known as the additional child tax credit (ACTC). Combined, this could mean up to $26,000 in government stimulus credits for qualified taxpayers.
What is the Recovery Rebate Credit?
The Recovery Rebate Credit (RRC) is a credit available to taxpayers who received less than the full $1,200/$2,400 economic relief payment in 2020. It is intended to help support those individuals who still experienced financial hardship due to the pandemic and were not able to get the full amount of government assistance. Taxpayers can receive up to $1,200 as a credit for taxpayers filing single, $2,400 for taxpayers filing jointly, and up to $500 for each eligible dependent.
To qualify, taxpayers must meet certain eligibility requirements, including having an adjusted gross income (AGI) below certain thresholds. Taxpayers are eligible if they have an AGI of less than $75,000 if they file single or $150,000 if they file married filing jointly. Taxpayers with higher incomes may be eligible if they had an AGI below $99,000 if they file single or if they are married and filing jointly, if their AGI is below $198,000.
The credit is calculated based on the amount of assistance taxpayers received in 2020 and the amount of assistance they would have been eligible to receive. For example, if taxpayers are eligible for the RRC but only received $500 as their economic stimulus payment, they can receive up to $700 as a credit.
How to Claim the Recovery Rebate Credit
The RRC is claimed on Form 1040 or 1040-SR, U.S. Individual Income Tax Return. Recovery Rebate Credit can be claimed by including the amount of assistance taxpayers received in 2020 on the form, or if they didn’t receive assistance, by the net amount of assistance taxpayers would have been eligible for.
To claim the credit, taxpayers must be able to complete the following steps:
1. Determine Eligibility: Taxpayers must determine if they are eligible for the RRC by using the IRS’s RRC Eligibility Tool.
2. Calculate Amount: Taxpayers must calculate the amount of credit they are eligible to claim. They must use the IRS’s Tax Calculator to determine the amount of assistance they received in 2020 or would have been eligible to receive.
3. Claim the Credit: Taxpayers must complete the appropriate forms, such as Schedule R (Form 1040 or 1040-SR).
How to Claim the Additional Child Tax Credit
The Additional Child Tax Credit (ACTC) is a credit available to taxpayers who meet certain eligibility requirements and who did not receive the full $2,000 per dependent despite being eligible for it. Taxpayers can receive up to $1,400 for each eligible child dependent.
To qualify for the ACTC, taxpayers must meet the following eligibility requirements:
• Have at least one eligible child who is under the age of 17 at the end of 2020
• Can not have received the full $2,000 per dependent despite being eligible for it
• Have an adjusted gross income (AGI) of $200,000 or less if filing married filing jointly; or $125,000 or less if filing single, head of household, or qualifying widow(er)
To claim the credit, taxpayers must:
1. Determine eligibility: Taxpayers must determine if they qualify for the ACTC by reviewing the ACTC eligibility requirements outlined above.
2. Calculate the Amount: Taxpayers must calculate the amount they are eligible to claim. They must use the IRS’s Tax Calculator to determine the amount of assistance they received in 2020 or would have been eligible to receive.
3. Claim the Credit: Taxpayers must complete the appropriate forms, such as Form 8862, “Credits for Children and Dependents,” and include it with their tax return.
Final Thought
The coronavirus pandemic has caused financial hardship for many individuals and families. To help support those struggling economically, the federal government created the $1,200 economic relief payment. Additionally, the IRS has introduced a variety of stimulus credits, such as the Recovery Rebate Credit (RRC) and the Additional Child Tax Credit (ACTC). Combined, taxpayers can receive up to $26,000 in government stimulus credits for taxpayers who qualify for the credits. Qualified taxpayers must remember to complete the required forms and be sure to follow the eligibility requirements to ensure they receive the maximum amount of benefit from the credits.
While these stimulus credits can provide much-needed financial assistance, taxpayers must remember to file their taxes on time and be sure to include the necessary forms. Those who qualify can receive up to $26,000 in government stimulus credits and should ensure they are taking full advantage of the credits available to them.
