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The Recovery Rebate Credit: Can The IRS Keep It?

Individuals who did not receive the first, second, or both Economic Impact Payments (also known as stimulus checks) may still get their money through the Recovery Rebate Credit, but don’t spend that money just yet. Creditors, debt collectors, and the Internal Revenue Service (IRS) may legally seize some or all of the tax credit you are due.

What is the Recovery Rebate Credit?

The Recovery Rebate Credit is a tax credit included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-related Tax Relief Act. It essentially increases your tax refund or decreases the amount of taxes you may owe.

The Recovery Rebate Credit was paid in two installments, otherwise known as stimulus checks or Economic Impact Payments. The first payment went out in 2020, and the second check was released in early 2021.

Who Can Claim the Credit?

Eligible taxpayers who did not receive either or both of the payments, or less than the full amount, may request the remainder of the tax credit on their 2020 tax returns (Form 1040 or Form 1040-SR). In general, you are eligible to receive the Recovery Rebate Credit if all of the following are true:

  • In 2020, you were a U.S. citizen or resident alien
  • You cannot be claimed as a dependent by another taxpayer
  • You have a valid Social Security number (issued before April 15, 2021)

To claim the tax credit, you must file using Form 1040 or Form 104-SR, even if you aren’t normally required to file taxes. If you live in a U.S. territory, however, the tax authorities in those areas will issue the credit and you should not submit your request on your 2020 tax forms.

How to Determine the Recovery Rebate Credit Amount

Your 2020 tax return will include a Recovery Rebate Credit Worksheet that will help you determine how much of a tax credit you may receive. The credit amount will vary based on how much you did or did not receive in Economic Impact Payments (stimulus checks). If you do not know the exact total of your stimulus checks, there are two ways to locate this information:

  1. IRS Notice 1444 – This notice was a letter signed by former President Trump that you should have received in the mail.
  2. Federal Tax Account – If you no longer have Notice 1444, you can log into your federal tax account at irs.gov/account to view the amount of your stimulus checks.

The amount of the tax credit phases out if your adjusted gross income for 2020 exceeds $75,000 (single) or $150,000 (married filing jointly).

Can the IRS Keep My Recovery Rebate Credit?

Many taxpayers saw their first stimulus checks go to private creditors and debt collectors. Others lost their money due to unpaid child support. Congress was quick to correct this, however, with the second round of checks. This ensured that all taxpayers checks were protected from the IRS and other debt collectors. Those protections, unfortunately, do not extend to the Rebate Recovery Credit when filing taxes.

If you owe taxes, child support, or other government debts, the IRS can take your tax credit to pay toward those debts. Banks, debt collectors and other creditors may also have a right to garnish any funds you may be due under the Recovery Rebate Credit. This could change, of course, if Congress steps in and changes the current tax laws, but time is running out.

Get Help With Your Taxes Now

If you did not receive your stimulus checks due to unfiled tax returns, or you are worried that your Recovery Rebate Credit may be offset, contact Tax Defense Network ASAP. We can help you file late returns, work with the IRS to lower or eliminate your tax debt, and ensure you are getting all the tax deductions and credits you deserve. Call 833-803-4222 and schedule a free, no-obligation consultation today!