The Internal Revenue Service (IRS) is mailing letters to some taxpayers who had claimed the 2020 Recovery Rebate Credit (RRC) and may be getting a different amount than they expected.
When the IRS processes a 2020 tax return claiming the credit, they determine the eligibility and amount of the taxpayer's credit based on the 2020 tax return information and the amounts of any Economic Impact Payments (EIP) previously issued. If a taxpayer is eligible, it will be reduced by the amount of any EIPs already issued to them. If there was an error, the IRS will calculate the correct amount, make the necessary correction, and continue processing the return, which may cause a delay. As a result, the IRS will send a letter or notice explaining the change(s) to the taxpayer.
Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should carefully read the notice. Then they should review their 2020 tax return along with Form 1040 worksheet and Form 1040-SR instructions when contacting the IRS.
Common reasons the IRS corrected the credit amount:
- Individual was claimed as a dependent on another person's 2020 tax return
- Individual did not provide a Social Security number valid for employment
- Qualifying child was age 17 or older on January 1, 2020
- Math errors relating to calculating adjusted gross income and any EIPs already received
It is important to note, the first and second EIP were advance payments of the 2020 credit. Most eligible people already received the first and second payments and may not need to include this information on their 2020 tax return.