With TY2021 tax preparation underway, there are many questions regarding the Recovery Rebate Credit. Yesterday, in an effort to better assist tax professionals and taxpayers in the accurate preparation of TY2021 tax returns, the IRS issued a news release containing updated Frequently Asked Questions (FAQs) that uTax is sharing with you below.
We have also provided links to the previously shared, Child Tax Credit and Advanced Child Tax Credit Payments Information that includes updated FAQs and details regarding letters sent to taxpayers by the IRS to bring to their tax preparation appointments.
IRS News Release – IR-2022-13 – January 13, 2022
IRS issues Frequently Asked Questions and Answers for 2021 Recovery Rebate Credit
WASHINGTON — The Internal Revenue Service today issued frequently asked questions (FAQs) for the 2021 Recovery Rebate Credit PDF. Individuals who did not qualify for, or did not receive, the full amount of the third Economic Impact Payment may be eligible to claim the 2021 Recovery Rebate Credit based on their 2021 tax year information. Individuals may have received their third Economic Impact Payment through initial and “plus-up” payments in 2021.
Note: Third Economic Impact Payments are different than the monthly advance Child Tax Credit payments that the IRS disbursed from July through December 2021.
Most eligible people already received their Economic Impact Payments and won’t include any information about their payment when they file. However, people who are missing stimulus payments should review the information on the Recovery Rebate Credit page to determine their eligibility and whether they need to claim a Recovery Rebate Credit for tax year 2021.
To claim any remaining credit for 2021, eligible people must file a 2021 tax return, even if they usually do not file taxes. Also, people who did not receive all of their first and second Economic Impact Payments in 2020 can receive those amounts only by filing a 2020 tax return (or amending a previously filed return) and claiming the 2020 Recovery Rebate Credit. They should review the Recovery Rebate Credit page to determine their eligibility.
The 2021 Recovery Rebate Credit can reduce any taxes owed or be included in the tax refund for the 2021 tax year. Filers must ensure to not mix information from their 2020 and 2021 tax years. In particular, filers should take care to NOT include any information regarding the first and second Economic Impact Payments received in 2020, or the 2020 Recovery Rebate Credit, on their 2021 return. They will need the total of the third payment received to accurately calculate the 2021 Recovery Rebate Credit when they file their 2021 federal tax return in 2022.
People can locate this information on Letter 1444-C, which they received from the IRS during 2021 after each payment, as well as Letter 6475, which the IRS will mail to them beginning in late January 2022. Individuals can also view this information in their online account later in January.
The FAQs cover most questions relating to claiming the credit and are for use by taxpayers and tax professionals and are being issued as expeditiously as possible.
The 2021 Recovery Rebate FAQ topics are:
Child Tax Credit and Advanced Child Tax Credit Payments Information
Refer to our previous partner communication, IRS Updates FAQs for Child Tax Credit and Advanced Child Tax Credit Payments or go direct to the IRS News Releases below.
IRS News Release – IR-2022-10, January 11, 2022
- IRS Updates FAQs for 2021 Child Tax Credit and Advance Child Tax Credit Payments
IRS News Release IR-2021-255, December 22, 2021 | Español
- IRS Issues Information Letters to Advance Child Tax Credit Recipients (Letter 6419) and Recipients of the Third Round of Economic Impact Payments (Letter 6475); Taxpayers Should Hold onto Letters to Help the 2022 Filing Season Experience
The uTax Team