Tax season begins in earnest when the Internal Revenue Service begins processing individual returns on February 12. It will now be up to the taxpayers to report the various tax breaks brought on by coronavirus relief laws passed by Congress in 2020. The most impactful of these is by far the recovery rebate credit. Two rounds of economic impact payments or “stimulus checks” have gone out in the past year. These stimulus funds represent an advance payment of a special 2020 tax credit that will be reconciled on your 2020 tax return. If the credit exceeds what you received, then you will be able to claim the additional credit on your return. If the payments that you receive exceed the credit, you will not have to pay them back.
The economic impact payments were calculated based on your 2019 tax information. Therefore, if there is a change in your income or filing status for 2020, this could make you eligible for an additional credit. Here are three situations in which someone may be able to claim an additional credit on their 2020 tax return.
- If you have a new addition to the family in 2020 such as an adoption or birth of a child, then you should be able to claim an additional credit.
- If your income was reduced in 2020 in comparison to 2019, you may be eligible for an additional credit if your income falls below the threshold of $ 75,000 single or $ 150,000 for joint filers.
- If you were claimed as a dependent on your parent’s 2019 return but are filing 2020 on your own, then you should be eligible to take the credit if your income is below the threshold. The threshold is $ 75,000 of income for a single filer. This may apply if you graduated from college in 2019.
We are committed to serving your tax preparation and tax planning needs. If you have questions on the Recovery Rebate Credit or any other tax matters, please do not hesitate to contact our office. We wish you the best for the new year!