If a taxpayer did not receive one or both Economic Impact Payments (EIP) in 2020, or received a payment for less than they were entitled to, they may be able to claim a credit on their 2020 tax return.
Who Qualifies for the Recovery Rebate Credit?
The Recovery Rebate Credit is figured like the 2020 Economic Impact Payments, except that the credit eligibility and amount are based on the information shown on the 2020 tax year return.
Generally, taxpayers are eligible to claim the Recovery Rebate Credit if they:
- were a U.S. citizen or U.S. resident alien in 2020,
- are not a dependent of another taxpayer for tax year 2020, and
- have a social security number valid for employment that is issued before the due date of their 2020 tax return (including extensions).
The two EIP amounts issued in 2020 were calculated as follows based on the information provided in the taxpayer's 2019 tax return:
| Payment | Taxpayer | Spouse | Each dependent |
| EIP1 | $1,200 | $1,200 | $500 |
| EIP2 | $600 | $600 | $600 |
For the purpose of the Recovery Rebate Credit, a qualifying child meets two tests:
- They are under age 17.
- They otherwise qualify for the Child Tax Credit.
The recovery rebate credit amount is phased out when the adjusted gross income exceeds $150,000 for married filing joint returns, $112,500 for head of household returns, or $75,000 for any other filing status.
Because EIP1 and EIP2 were an advance of the recovery rebate, the worksheet provides a Recovery Rebate Credit to the extent the recovery rebate amount is more than the amount of the Economic Impact Payments received. However, if the EIP1 and EIP2 total more than the Recovery Rebate Credit, the taxpayer will not have to repay the difference.
How to figure the credit in the desktop program
When you create a new tax return in TaxSlayer Pro in 2020, you will be prompted with the following question:
Answer Yes if your client did not receive an EIP in 2020, or if they received an amount less than they qualified for. You can also answer Yes to go through the process and produce the worksheet to see how the credit is calculating.
After answering Yes, the Recovery Rebate Credit Worksheet Menu will display:
Enter the EIP1 and EIP2 amounts, if any. Note that both EIPs were subject to being offset by the IRS if the taxpayer owed past-due debts to federal or state agencies, therefore for the credit to calculate correctly you need to enter the amount of the payment shown on Notices 1444 and 1444-B rather than the amount the taxpayer actually received.
The credit is calculated based on the filing status, AGI, number of dependents, and the payments already received, so the amount displayed when you initially create the return may be different when the return is finished.
- Payments, Estimates & EIC
- Recovery Rebate Credit
Diagnostic Warning
A return that includes the Recovery Rebate Credit will display the following diagnostic warning:
This diagnostic warning doesn't indicate there is a problem; it's there to keep you on your toes to ensure you've completed the menu accurately.
Note: This is a guide to the Recovery Rebate Credit in the TaxSlayer Pro program. It is not intended as tax advice.
Additional Information:
IRS: 2020 Recovery Rebate Credit