Congress passed several bills in the last year to provide relief for millions of Americans who are struggling financially due to the COVID-19 pandemic. Some of the provisions in these bills were geared toward assisting businesses (for example, PPP loans), while some provided aid directly to individuals.
The first bill Congress passed was the CARES Act (Coronavirus Aid, Relief, and Economic Security Act). This was signed into law on March 27, 2020. One of the provisions in the CARES Act directed $300 billion in one-time cash payments by the government to certain individual Americans. The language in the bill referred to these payments as Economic Impact Payments (EIPs), but most Americans know of them as stimulus payments.
Stimulus payments (EIPs) issued under the CARES Act were $1,200 for eligible individuals and $2,400 for eligible married couples filing a joint return plus $500 for each dependent age 16 or younger. A second round of stimulus payments began December 29, 2020. These payments went to eligible individuals at $600 for individuals and $1,200 for married couples filing a joint return plus $600 for each dependent age 16 or younger. In addition to the first two rounds, in early February the Senate approved a budget plan (the American Rescue Plan) that includes a proposal for a third round of direct payments. The current proposal provides for payments of $1,400 per person, although details are still being hammered out.
If you were eligible to receive a stimulus payment in either of the first two rounds but did not receive it, or if you received less than the full amount you are entitled to, you may qualify for the Recovery Rebate Credit (RRC) when you file your 2020 tax return.
In general, you get a Recovery Rebate Credit (RRC) on your 2020 tax return for amount:
- Calculated Recovery Rebate Credit EXCEEDS Stimulus payment(s) received in 2020 and Jan 2021.
Any stimulus payment (EIP) you received was a “prepayment” of your Recovery Rebate Credit. The worksheet to calculate your RRC is in the Form 1040 instructions. If you can claim a RRC on your tax return, it goes on Form 1040 line 30 and lowers your taxes.
You can check the status of your stimulus payments or date you received them using the following link:
Additional information about Economic Impact Payments and the Recovery Rebate Credit can be found on the following pages:
If you are needing help with preparing your 2021 taxes or have any additional questions, feel free to contact a Henry+Horne professional.
Todd Smith, CPA