IRS Issues EIP3 Reminder
The Internal Revenue Service says it has sent out all the third-round Economic Impact Payments (EIPs), but the agency is quick to add that taxpayers who missed out on the EIP still have one more chance to claim their money.
These individuals will have to file a 2021 income tax return and claim the Recovery Rebate Credit in order to collect.
Why these individuals didn’t take advantage of the third Economic Impact Payments can vary. Maybe they just waited too long to go online and register for the EIP. Or perhaps they had a child born in 2021 who came into the world too late to qualify for the credit.
By claiming the Recovery Rebate Credit on their tax return, these parents can receive up to $1,400 for their new child.
Some EIPs are still in the process of being delivered, but the IRS is done issuing any of the three Economic Impact Payments.
As of the end of 2021, the IRS had issued more than 175 million third-round EIPs, totaling over $400 billion to individuals and families across the U.S.
In January, the IRS started sending out Letter 6475, Your Third Economic Impact Payment, to those who received the third-round EIP. The letter was designed to help EIP recipients determine if they’re entitled to claim the Recovery Rebate Credit, and if so, how to claim it.
Who can still claim the Recovery Rebate Credit?
The third-round Economic Impact Payment was basically an advance payment of the Recovery Rebate Credit for the 2021 tax year, based on the taxpayer’s income and number of dependents they listed on their 2019 or 2020 income tax return.
The 2021 Recovery Rebate Credit, however, is based on income and the number of dependents listed on the filer’s 2021 income tax return.
A number of scenarios could be responsible for an individual missing out on an Economic Impact Payment. Many times, it could be as simple as circumstances changing in 2021 from what they were in 2020.
Here are a few examples of people who may be eligible to get more money by claiming the Recovery Rebate Credit on their income tax return. Be aware, however, there could be others not listed here:
- Parents of a child born in 2021 who claim the child as a dependent on their 2021 income tax return may be eligible to receive a 2021 Recovery Rebate Credit of up to $1,400 for this child.
- All eligible parents of qualifying children born or welcomed through adoption or foster care in 2021 are also encouraged to claim the child tax credit — worth up to $3,600 per child born in 2021 — on their 2021 income tax return.
- Families who added a dependent – such as a parent, a nephew or niece, or a grandchild – on their 2021 income tax return who was not listed as a dependent on their 2020 income tax return may be eligible to receive a 2021 Recovery Rebate Credit of up to $1,400 for this dependent.
- Single filers who had incomes above $80,000 in 2020 but less than this amount in 2021; married couples who filed a joint return and had incomes above $160,000 in 2020 but less than this amount in 2021; and head of household filers who had incomes above $120,000 in 2020 but less than this amount in 2021 may be eligible for a 2021 Recovery Rebate Credit of up to $1,400 per person.
- Single filers who had incomes between $75,000 and $80,000 in 2020 but had lower incomes in 2021; married couples who filed a joint return and had incomes between $150,000 and $160,000 in 2020 but had lower incomes in 2021; and head of household filers who had incomes between $112,500 and $120,000 in 2020 but had lower incomes in 2021 may be eligible for a 2021 Recovery Rebate Credit.
The Recovery Rebate Credit can also be used to receive any part of the first two Economic Impact Payments the filer may have missed. If the filer didn’t get the full amount of the EIPs, or missed a payment altogether, they would need to claim the Recovery Rebate Credit on their 2020 income tax return – or to file an amended return if it’s already been processed.
Claiming the 2021 Recovery Rebate Credit
Before actually claiming the Recovery Rebate Credit, filers need to make sure they have all the documentation necessary to file an accurate return. Filing a correct return will help to avoid delays in processing and will hold up any refund payment.
Once they’re ready to file, would-be filers need to know the total amount of their third-round EIP. This amount should include any “Plus-Up” payments they received.
The IRS sent out “Plus-Up” payments to those who received a third-round Economic Impact Payment based on their 2019 tax return and were eligible for a larger amount according to updated information on their 2020 return.
Be aware that the IRS Get My Payment application will shut down at the end of January. Instead, taxpayers are urged to use their Online Account to access their EIP information.
Letter 6475 from the IRS will also have this information, although some taxpayers may not get their letter until sometime in March.
Married taxpayers filing a joint return with their spouse should remember that each spouse will have to log into their own Online Account or look over their own letter for their part of the couple’s total payment.
For the fastest refund, e-file
The same options that speed up processing of income tax returns apply for speeding up the Recovery Rebate Credit: e-file, file an accurate return and choose direct deposit for any refund.
A trusted tax professional can help their clients with all three.
The 2021 Recovery Rebate Credit will first reduce the tax due for qualified taxpayers, with the remainder added to any refund they may have. The refund of the credit will be paid along with the tax refund, so it won’t be sent out separately.
The third round of Economic Impact Payments was authorized by the American Rescue Plan Act of 2021, signed into law in March. The IRS started sending out the EIPs on March 12, 2021, and continued through the end of the year.