Recovery Rebate Credit: Last Chance to Claim Your Missing $1,400 Stimulus Payment

The IRS is sending out $1,400 in stimulus payments to some taxpayers. These are the people who failed to claim the Recovery Rebate Credit for 2021.

More than 1 million people are likely to be owed a lot in these recovery rebate credit payments. However, many don't even know the way to get it. There are many who didn’t get their payment when it first came. 

Maybe your financial situation has worsened or improved. Either way, you are entitled to file for it on your tax return.

In this article, we'll explain how to claim your recovery rebate credit and provide other important information. 

What Is the Recovery Rebate Credit?

Within the coronavirus relief package, the Recovery Rebate Credit was to support American taxpayers. It came during the pandemic to help them out. The government made provision for it in 2020. It came under the CARES Act. Each person was getting about $1,200. Then, if they had dependents, those ones could get about $500 each.

In turn, the Consolidated Appropriations Act of 2021 added another round of stimulus payments. This came to about $600 per person. A third one was also added to it. With this, there was another round of payments, and the amount was $1,400.

The funds are what we now know as stimulus checks. They were pre-distributions of the tax credit. Distribution was largely based on details from citizens’ tax returns or benefits data. The goal was to give receivers some immediate financial aid, without having to file tax returns.

However, not everybody got the full amount they qualified for in these initial payouts. So, now there's an opportunity to reclaim extra stimulus funds to which they were entitled but did not receive. Those who did not get a $1,400 third stimulus will need to claim what remains as a 2021 tax credit.

Who Is Eligible for the Recovery Rebate Credit?

The Recovery Rebate Credit is only applicable if you meet several conditions. In order to be eligible for the credit on your 2021 tax return, you must be a U.S. citizen or resident alien. Then, you need your SSN, which has to be valid. One that qualified you for employment by the 2021 tax return deadline.

You must not have been reported as a dependent on someone else’s 2021 tax return. All the stimulus payments you were entitled to must not have been received already.

There is a threshold on income level that determines whether you are eligible. Regarding the third stimulus payment of $1400, eligible single filers can earn the full credit with a limited AGI. It must not exceed $75,000. Heads of families will qualify with an AGI of $112,500.

When it comes to married couples, their amount can be up to $150,000 if they file together. The credit vanishes at these income levels. It reaches zero at $80K for singles and $120K for heads of households. Then, at $160K for joint filers.

Fluctuations in your individual circumstances in 2021 may have affected your ability to receive the stimulus. If you got hitched in 2020 or 2021, there are changes to your filing status. Your overall household income could have changed, too. This may make you a non-recipient of the stimulus payment. 

As an example, should two parents and two qualifying children belong to a family, up to $5,600 may be eligible. The same pair may receive a phase-out when filing jointly with a $140,000 combined income.

Taking parenthood in 2021 may add an additional $1,400 to your credit. That's for each qualifying dependent. Your baby that was born before 2021 ended can also qualify. It's fine if they were not part of your prior stimulus payments.

Now, your dependency status may be different in 2020 than in 2021. So, now, it’s possible for you to get the credit on your own return. Your income may have sharply decreased between 2021 and the previous year. You can get it if the money you earn now falls within the range of those eligible.

How To Calculate Your Recovery Rebate Credit

To determine your Recovery Rebate Credit, you need to find out your maximum allowed credit. Then, you will remove the stimulus payments you received before now. Your maximum possible credit amount is determined by the filing status you pick. This calculation considers how many of your qualifying dependents you are claiming. Each eligible person is entitled to $1,400. 

Married couples filing jointly may receive $2,800, and each qualifying dependent will also receive $1,400. For example, let’s say we have a family of two parents. Then, their two children are also qualified to get it. This means they’ll be able to get up to $5,600. That's if their family’s income falls in the eligible bracket.

Credit starts to go down if your AGI goes beyond the set threshold. The credit is also reduced proportionally. It is just 5% of the amount by which your AGI goes over the limit. For instance, a single filer reports $76,000 of AGI. They are therefore above the threshold by $1,000. So, they would lose $50 of their credit ($1,000 × 5% = $50).

If you were eligible for more money in 2021 and received less, you could be eligible. You'll just claim the remaining amount on your refund for that year.

How To Claim the Credit on Your Tax Return

Now, you know what's happening. It’s the IRS sending $1,400 stimulus checks to eligible taxpayers who missed recovery rebate credit.

So, you have not filed your return for 2021 and believe you qualify for the Recovery Rebate Credit. You need to file your return by tax day. This still applies if your income was low or nothing last year. Ordinarily, you would not have to file a return.

To take the credit on your 2021 return, gather the necessary documents. These may include any IRS notices pertaining to your prior stimulus payments. An example is Notice 1444-C if you received the third payment. You can use tax preparation software.

Another option is the Recovery Rebate Credit Worksheet, which can be found in the instructions for Form 1040. These can help you determine how much you are entitled to. Next, enter the computed credit on line 30 of Form 1040 or Form 1040-SR.

The credit should be reported only on the tax return for the year it applies. The $1,400 third stimulus check payments must be reflected in your 2021 tax form. It is not something that can be listed on 2022, 2023, or any future returns.

How to File an Amended Return

However, you may have filed your 2021 tax return and did not claim the Recovery Rebate Credit on your return. So, you can file an amended return using Form 1040-X once your original return has been processed. Submit Form 1040-X, and indicate on Part III. That will show you’re claiming the Recovery Rebate Credit you failed to include previously.

Include complete calculations and other paperwork, such as records of previous stimulus payments. Get your amended return submitted by tax day.

Amended return processing might take longer than the original return. It typically takes 16 weeks or more because it needs manual processing. Use the IRS "Where’s my amended return?” tool to track your amended return’s progress.

Wrap Up

The window of opportunity for claiming your unclaimed stimulus funds is coming to an end very soon. If you think you might be eligible for the Recovery Rebate credit, be sure to submit your 2021 tax return. If you don't do that as soon as possible, you'll be gifting the government your money. Pending stimulus payments will go back to the U.S. Treasury if you have not filed by the deadline. 

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