In the rush to get stimulus payments out, the Internal Revenue Service relied on data it already had to determine who was eligible. That means some people didn’t receive the full amount they were owed, while others didn’t get a payment at all.
This tax filing season offers a chance to rectify that situation. That’s because the payments were structured as advances on a 2020 tax credit, which can now be claimed on returns.
Q: How much should I have gotten?
A: Congress authorized two rounds of direct payments, first in March, then in late December.
The March payment maxed out at $1,200 ($2,400 for married joint filers), plus $500 for each dependent under 17 years old.
The December payment maxed out at $600 ($1,200 for married joint filers), plus $600 for each dependent under 17 years old.
People earning above those thresholds can still be eligible for a smaller payment. The payments phase out at a 5% rate, which means a $50 cut for every $1,000 you are over the threshold.
Q: Why didn’t I get the full payment?
A: To send money as soon as possible, Congress ordered the IRS to use existing data. That meant for the first round of payments (which were sent either as a check or Economic Impact Payment debit card), authorized in March, the IRS relied on reported income from either 2018 or 2019 tax returns.
Relying on old data led to some people slipping through the cracks, including:
– People who saw their income drop in 2020, putting them below the thresholds outlined above.
– People who don’t file an annual return because they don’t earn enough taxable income. That includes seniors who receive only Social Security benefits.
– New parents who should have received a supplemental payment for a dependent.
Q: I should have received more. What do I do?
A: File your tax return! The sooner you file your taxes, the sooner the IRS will pay out the difference.
Pay particular attention to line 30 of your Form 1040, which asks about a “Recovery Rebate Credit.”
The IRS is looking for you to calculate the difference between what you did receive and what you should have received. Here is an example:
A couple who received $3,600 in stimulus money ($2,400 per couple in round one, $1,200 per in round two), but had their first child in 2020, would be able to claim the dependent supplements they didn’t get. One line 30, they would claim a credit of $1,100 ($500 for round one plus $600 for round two).
Q: I got more than I should have. Do I have to pay it back?
A: If you were fortunate enough to receive a raise in 2020 that put you above the income threshold, you won’t have to pay back the difference.
If you want to return any of the money you received through the program, extra or not, consult instructions from the IRS.