San Francisco Tax Preparation / CPA: IRS Answers FAQs on RRCs

Filed in CCH NEWS FEED by on May 5, 2021

The IRS has been mailing letters to some taxpayers who claimed the 2020 recovery rebate credit (RRC) and may be getting a different amount than they expected.

The IRS reminders taxpayers that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and should not or do not need to include this information on their 2020 tax return. People who did not receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. They must file a 2020 tax return to claim the credit, even if they do not usually file a tax return.

When it processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer’s credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, it will be reduced by the amount of any EIPs already issued to them. If there is a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return, and the IRS will send the taxpayer a letter or notice explaining any change.

On the IRS website, there is a special section called “Correcting Recovery Rebate Credit issues after the 2020 tax return is filed” (see https://www.irs.gov/newsroom/2020-recovery-rebate-credit-topic-g-correcting-issues-after-the-2020-tax-return-is-filed) that provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter, as well as the questions and answers for what information they should have available when contacting the IRS.

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