Some tax refund delays might be attributed to the extra time that the IRS needs to correct mistakes that are being made when people claim the Recovery Rebate Credit. Other factors could be at play, too.
Some people who lost jobs in 2020 could see even more money than their initial income tax refund, too.
The IRS said in late March that it would take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent tax break for jobless benefits was put into place as part of the American Rescue Plan.
The first special refund payouts will likely be made in May, and they will continue into the summer.
Make sure that you are providing your tax preparer with a correct number for the amount of money that you received for two stimulus payments, the first that rolled out starting last April and the second that rolled out in January.
“One of the biggest challenges this year is accurately reporting to the IRS the stimulus amounts received by taxpayers,” said Antonio Brown, a CPA in Flint and a member of the Michigan Association of CPAs.
“We need that information. If they did not receive both stimulus payments or only received one, we need to know it because the Recovery Rebate Credit is the way to receive the stimulus money that they didn’t get,” Brown said.
If a child was born or adopted into your family in 2020, you could end up with an extra stimulus payment for your new dependent, for example.
The first stimulus program offered up to an extra $500 per qualifying dependent. The second stimulus program had a $600 cap. So some parents of 2020 newborns could receive up to $1,100 extra now if they did not receive that money earlier.
The first and second Economic Impact Payments were based on information included on your most recent tax return — which might have been the 2018 or 2019 returns.
“Some will want to file even if it is just to claim the credit,” Brown said.
The third stimulus program — which began rolling out money in March and is ongoing —offers up to $1,200 for qualifying dependents.
“Even people incarcerated, who work inside the correction facilities, can claim the recovery rebate credit so long as they file a tax return, report their wages earned, and use either direct deposit or an address other than the correction facility,” Brown said.
The IRS is correcting many mistakes that are being made after people plug in the wrong number for the Recovery Rebate Credit on their federal income tax returns. The IRS will correct the errors and issue a refund after making the adjustment.
The IRS said in early April that the agency had already issued 2.5 million letters relating to issues with the Recovery Rebate Credit. That amounted to 10.4% of almost 24 million individual e-filed tax returns received that claimed this credit.
The IRS will not figure out the Recovery Rebate Credit for you. You need to claim it when you file a 1040 return.
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Kathy Pickering, chief tax officer for H&R Block, noted that the 2020 stimulus payments are not taxable income, so you’re not reporting that money as income on your tax return.
On the plus side, you’re not paying back stimulus money that you received last year if your stimulus payments were too high if your income increased in 2020, compared with 2019. Or if your kids turned 17 in 2020 and no longer qualified for the first two stimulus programs.
“You do not have to repay any overpayments and your refund won’t be reduced,” she said.
When it comes to the third stimulus payments that began being issued in March, she noted that some taxpayers could be seeing a “plus up” payment of additional stimulus money, depending on when a 2020 federal income tax return was processed.
“For the ‘plus up” payment, the IRS will re-determine your eligibility for an additional payment after you file your 2020 tax return,” Pickering said.
“If you are due more, you’ll receive another payment from the IRS for the difference.”
More stimulus news: “When you file taxes next year, you could receive an additional payment on your tax return with the 2021 Recovery Rebate Credit if in 2021 you have a child, your income drops significantly, or you file for the first time,” Pickering said.
Contact Susan Tompor via stompor@freepress.com Follow her on Twitter @ tompor freep.com/specialoffer. Read more on business and sign up for our business newsletter .
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