I'm willing to bet that line 30 will be one of the most scrutinized lines on the 2020 tax year Form 1040. That's where taxpayers can claim the new Recovery Rebate Credit, or RRC.
The RRC is the official name of the money issued in 2020 and earlier this year as COVID-19 economic impact payments, or EIPs. The payments actually were advance payments on this tax credit.
If you didn't get any or all of either EIP last year, you can claim it this filing season on the aforementioned and likely popular line 30. Depending on your actual income amount you report on your 2020 return, any unreceived RRC could be a nice benefit.
But you need to know just how much of the credit you got in advance. That's because the earlier EIP amounts will reduce any RRC you can receive this year when you file.
And this is where creation of your personal online taxpayer account at IRS.gov could help.
Early credit cash: First, a quick look at why line 30 is on this year's tax return.
As people started feeling the adverse fiscal effects of the pandemic, Capitol Hill took legislative action. Notably, it created two payments to help individuals weather their personal financial storms.
The first, created under the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020, was for $1,200 per taxpayer plus $500 for qualifying dependent children. This has been dubbed EIP 1.
The second, known as EIP 2 (but you already guessed that, right?) was part of the Consolidated Appropriations Act, 2021, enacted on Dec. 27, 2020, and provided another $600 per person.
Technically, the EIPs were for the tax year 2020, but to quickly get the money into cash-strapped people's hands, both laws directed the IRS to distribute the funds as soon as possible. To do that, the tax agency used prior year tax information to determine EIP amounts.
Since the relief payments were phased out for higher earners, the tax year income amounts the IRS use to calculate them meant some people got less than the maximum EIPs. But if individuals didn't make as much money in 2020 due to COVID-19 income cuts, they can get the remainder of their EIPs when they file now.
No notification letters: Some people, however, aren't sure what that remaining amount for which they now qualify is. That's because they don't remember exactly how much they got.
I get it. Bills are due. Kids are hungry. The money showed up in your bank account or you cashed the Treasury check as soon as you got it from your snail mail box. You didn't worry about jotting down how much it was. You just spent it.
The IRS saw this accounting oversight coming, so it sent letters, officially known as Notice 1444, along with the first EIPs. Sure, the letter has an annotation that said "NOTICE NUMBER: 1444 (EN-SP)." And yes, it cited the IRS special coronavirus website and 800 phone number.
But it didn't specifically say that you needed to keep it for your 2020 tax return filing records.
In fact, at the top of the document, it said The White House. And since the former president insisted on signing it, many saw the document as campaign material and tossed it.
As for EIP 2 amounts, the IRS plans to issue Notice 1444-B with payment details on the second amount. However, that document has not yet been sent to folks who received the second relief payment.
So how to know for sure, per IRS records, how much you got and need to subtract from your Recovery Rebate Credit claim this filing season?
You need to set up your personal taxpayer online account at IRS.gov.
Accessing your tax info: Wait. Doesn't the IRS already have our information?
Yes, for the most part, it does. What you'll actually be doing when you use the tax agency's online account tool is gaining access to that IRS information. And that can be helpful in many circumstances.
By using the system, you can access your individual taxpayer information, including:
- The amount you owe, updated for the current calendar day;
- Your balance details by year;
- Your payment history and any scheduled or pending payments;
- Key information from your most recent tax return;
- Payment plan details, if you have one;
- Digital copies of select notices from the IRS; and
- Your Economic Impact Payments, both EIP 1 and EIP 2, if any.
Note that last bullet point. Your IRS account has the amounts you received via both economic impact payments.
But wait, there's more. You also can use your online account to make a tax payment online; see payment plan options and request a plan via Online Payment Agreement. And if you want more, you can go directly from your online taxpayer account access to the Get Transcript tool.
I'm willing to bet, again, that the IRS will get lots of new online taxpayer account registrants this year so that they can find their EIP info.
Gathering IRS account registration info: OK, you've decided you want to access your online IRS account. Here's how.
The first step is collecting the information you'll need to access your information. This is evidence for the IRS so that it can verify your identity and so that only you can access your IRS online account. (Unless you're like the hubby and me, where I have access to his accounts and, being tax and money OCD, check them regularly and he has my info so he can do the same with my accounts, but never checks.)
This documentation includes:
- An email address,
- Your Social Security Number (SSN) or Individual Tax Identification Number (ITIN),
- Your most recent tax filing status and mailing address, A mobile phone linked to your name (for faster registration) or the ability to receive an activation code by mail, and
- One financial account number linked to your name.
The financial account types that the IRS will accept for identity verification include:
- Credit card. Here the IRS wants the card's last eight digits. It does not accept American Express, debit or corporate cards for ID verification.
- Student loan. Enter the student loan account number provided on your statement. The account number may contain both numbers and letters. Do not include any symbols. Additionally, the IRS can't verify student loans issued by Nelnet.
- Mortgage or home equity loan.
- Home equity line of credit (HELOC).
- Auto loan.
Again, you only need one of these financial accounts to set up access to your IRS online account.
Creating or accessing your account: Once you've gathered all that you need to set up your online taxpayer account, you're ready to register. The quickest way to do that is to go to the IRS' View Your Account Information page.
Midway down that page, you'll see a blue create or view your account button, like the one shown below.
When you click it at the IRS site, it will take you to the sign-up/sign-on page reproduced below.
If you have all the material cited earlier to register, the process should take around 15 minutes.
Checking your EIP and other tax info: Once you've created your account, you can check it to make sure that your filing, payment and other information is up to date.
And this year, you can check for how much you got in economic impact payments if you didn't hang onto Notice 1444 or, like all of us, don't yet have Notice 1444-B.
I just logged on to my account — I've had it for years and that's a screen capture below with my full name blacked out since no one needs to know what my mom yelled on those rare occasions she was angry with me — and the message in the light blue area at top tells me to click on the Tax Records tab for EIP info.
Yes, I left in the indication that the hubby and I are up to date with the IRS.
And yes, I also put that red star outline around the Tax Records tab because I like to play with photo editing options. I also wanted to make sure where to find EIP info stands out. A design idea for the IRS, too, perhaps?
I clicked on the tab and the EIP amount we got was there.
Correct info critical: So if you don't know precisely how much you got in EIP money, create your own taxpayer account access and check it. The IRS has the data and it will compare.
Claiming the correct amount of credit is important. You don't want to waste this tax break, which is a dollar-for-dollar offset of any tax you owe. Plus, the RRC/EIP money is the best kind of tax credit. It's refundable, meaning that if you qualify for more of the credit than tax you owe, the excess comes back to you as a refund.
But if you don't use the correct EIP amount you already received when you claim any additional credit you're due, the discrepancy will slow down arrival of that extra COVID-19 relief money this filing season.
You also might find these items of interest:
- A look at what, aside from $1,400 per person, is in Biden's COVID relief plan
- Taxpayer Advocate seeks equal debt treatment for all COVID relief payments
- Is the IRS ready to deliver more COVID relief payments? The commissioner is optimistic
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.