As if taxes weren’t stressful enough, the current income tax filing season marks the last call for 2020 stimulus check money.
Between the first and second batches of 2020 stimulus checks, the Internal Revenue Service has already distributed 307 million direct payments to Americans for a combined $412 billion.
That’s a lot of money distributed so far, but the IRS isn’t finished yet.
That’s good news for people who were eligible for stimulus money, but missed out on some or all of the payment. This group could include households with a new baby in 2020, people who earned less in 2020 than they did in 2019 and young adults who are filing their taxes for the first time.
To get their money, all these folks will have to claim their missed-out stimulus payment as a “Recovery Rebate Credit” on their 2020 income tax return. It’s their last chance: after that, the IRS will be finished giving out money from the two economic impact payments.
A 2020 tax return is “really the only vehicle that you have right now,” said Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs.
The bad news is that some 36% of taxpayers find the Recovery Rebate Credit rules the ”most confusing” part about a tax season loaded with all sorts of special provisions and rules, according to a 1,000-person survey from the tax preparation chain Jackson Hewitt.
The filing deadline is April 15, except for Texas and Oklahoma residents who are recovering from a massive winter storm and have a June 15 deadline. All taxpayers can get an extension to Oct. 15.
Here’s what to know to make that last call count.
What do I need to claim the money?
When someone seeks missed-out stimulus check money, they’ll technically be asking for a “Recovery Rebate Credit.” That’s Line 30 on this year’s Form 1040 and the 1040-SR, an income tax form geared toward senior citizens.
(The 1040-SR “is a bit more simplified than the 1040, but not much,” says John Waggoner, AARP.org’s senior writer, editor and producer. “If you can handle the SR, you can handle the 1040 too.”)
If you know the amount you’re still owed, go write that number on the line, or tell your tax preparer to do that, and continue with your taxes.
How to figure out how much you’re owed
If you’re not exactly sure what you’re still owed, here’s a step back.
The income thresholds were the same for both rounds of economic impact payments: individuals with adjusted gross incomes up to $75,000 received full payment. So did married couples filing jointly that made $150,000 and people filing as head of household who earned $112,500. Both payments gradually phase above those lines.
The first stimulus checks paid $1,200 to qualifying adults and $500 to qualifying children age 17 and under. The second paid $600 to adults and children alike.
When the IRS released the first checks in early spring, it looked at 2019 tax returns for income information. If those weren’t available, they reviewed 2018 returns. In the second round, the IRS reviewed 2019 returns.
People who either received no payment or a sum in the phase-out because of higher incomes in years past can receive the rest of what’s owed, so long as they made less income in 2020.
People who had a baby, adopted or fostered in 2020 also stand to get more cash because the IRS couldn’t have known about the new family additions when cutting the checks. Young adults once claimed as dependents can get the money too, as well as people who didn’t register for stimulus checks with the IRS’s non-filer portal.
The IRS sent two letters chronicling what they’ve paid a household, a Notice 1444 for the first round of payments and a Notice 1444-B for the second round. If someone is not sure how much more they should get, these letters are a good start because they confirm what’s already been paid. If they don’t have the letters, they can access the payout information in an online account with the IRS.
The letters aren’t make or break and don’t need to be submitted with the return. “They are not looking for you to provide that to them. That’s for your records,” said Kathy Pickering, H&R Block’s Chief Tax Officer.
There’s no need to supply back-up documentation like a birth certificate for a newborn. The IRS has ways to confirm the new dependents and new Social Security numbers on a return, Pickering said.
There’s a worksheet to help people compute the amount they think they are due, but Grzes said that’s optional and does not need to be submitted with a return.
What if I asked for the wrong amount?
Do not sweat that, Pickering said. If the amount is incorrect, the IRS can adjust the payout on their end instead of sending back the return for a do-over, Pickering said.
The agency will also send a letter to the taxpayer, telling them about the adjustment. It will also inform the taxpayer of their ability to challenge the adjustment afterwards, if that’s what the taxpayer wants to do.
How fast can I get my money?
The IRS recommends filing electronically, with direct deposit information included on the return. Most refunds come within 21 days from the point the IRS formally accepts return, according to Grzes.
Remember, people can use the IRS Free File Program, where tax software companies prepare returns free of charge for people who make up to $72,000. “If you file electronically and use some the free file program, they are really pretty easy. You’re plugging in the numbers and the program does the hard work for you,” Waggoner said.
Taxpayers below certain income levels can also potentially receive services from tax clinics. A search portal is available here.
Will I get my entire credit once I claim it?
Not necessarily. The money from the Recovery Rebate Credit gets incorporated with the rest of the refund coming to a taxpayer. That means it’s subject to refund offset rules, which will skim money off a refund to pay down debts including past-due child support and state income tax obligations.
Critics, including National Taxpayer Advocate Erin Collins, who leads an independent office within the IRS, have said it’s not fair to shield stimulus money from offsets and then have that occur once the money is paid via a tax return.
There’s a possible way around this, she notes. It’s called the “Offset Bypass Refund” process, which halts an offset when a taxpayer demonstrates an economic hardship.
Taxpayers can either directly request the Offset Bypass Refund from the IRS, or it can open a case with Collins’ Taxpayer Advocate Service, which will recommend whether to grant the bypass. The IRS itself gets the last say.
“You really have to make sure you present a good case,” said Omeed Firouzi, a staff attorney at Philadelphia Legal Assistance who is now working on two bypass applications. A good case needs documentation, like a utility shut-off notice, past-due medical bills or an eviction notice. “Something that shows you need the money right now.”
If people don’t know if past government debts will eat into a refund, they can call the Bureau of Fiscal Service’s Treasury Offset Program. That number is 800-304-3107.
Once the offset occurs, it cannot be reversed, Collins noted. Firouzi advises putting the request in before filing the tax return.
People can ask the Taxpayer Advocate Service to take up the matter in Form 911. That’s where they can attach documentation backing up their request. Another way to open a case is by calling the Taxpayer Advocate Service’s main line, which is 877-777-4778.
Will this interfere with my getting a third stimulus check?
No, according to IRS officials. They’ve previously said the agency can simultaneously process income tax returns and send out more stimulus checks if lawmakers authorize another round of direct payments.
As tax season continues, President Joe Biden is pressing for a $1.9 trillion relief package that includes a third round of stimulus checks. These checks would pay $1,400 apiece to adults and dependents. On Wednesday, Biden agreed to different rules for the third check. It would keep the same income levels for full payment, but phase out payments much quicker above that point. For example, a married couple wouldn’t get a third check if they earned over $160,000.
That highlights the question of whether it’s worth waiting to see what the eligibility requirements will be for a third round of checks. If a taxpayer made more money in 2020 than 2019, some financial advisers said they could wait to file their 2020 return. Once they have that third check, based on smaller earnings in 2019, that’s when they can file the 2020 return.
Other experts, like Pickering, advise against waiting games. “There’s so much uncertainty and complexity. People need to file right away so they know what their situation is.”
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