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Understanding the Recovery Rebate Credit

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2nd Stimulus Check * Understanding the Recovery Rebate Credit   

The Internal Revenue Service warns that many taxpayers are mistakenly trying to double-dip on last year’s federal tax rebate when they file their tax returns this year -- and the IRS is catching the errors.

A sampling of returns shows 15% of early filers made mistakes in the section dealing with the rebate, the IRS said Jan. 31. The errors were found using IRS software that checks for mathematical errors in returns.


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The IRS corrects the errors, delaying tax refunds by about a week.

The IRS sent taxpayers nearly 119 million rebate checks as part of last year’s economic-stimulus package. Individuals received up to $600 and married couples $1,200, plus $300 per eligible child.


Taxes taxes


The vast majority of taxpayers are ineligible for any more credits under the package. However, this year’s tax returns include a section for the few taxpayers who are eligible for an additional credit.

Many taxpayers have incorrectly entered the amount of their rebate check on the line that calls for the amount of the credit they are claiming, the IRS said. For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero.

Who is eligible to file?

Some people who were ineligible to file on their 2007 return could be able to file on the basis of their 2008 return. For example:

Your financial situation changed dramatically from 2007 to 2008. If you lost a job and your income fell below the thresholds of eligibility (phase-out begins at $75,000 for single filers and $150,000 for joint), you could file based on your 2008 income.

You did not file a 2007 tax return.

Your family gained an additional qualifying child in 2008.

You were claimed as a dependent on someone else’s return in 2007 but cannot be claimed as dependent by someone else in 2008.

If there is any question as to the amount that should be reported for the recovery rebate credit, the IRS says the taxpayer or preparer should enter a zero on the appropriate line, allowing the IRS to determine whether a recovery rebate credit is due, and, if so, how much.

Second chance for a tax rebate

The IRS also included a worksheet in its tax packages, but taxpayers must know the amount of last year’s rebate to complete the worksheet.

If taxpayers forgot the amount they received, they can get the information here, or place a toll-free phone call to 1-866-234-2942. More information on who might qualify is available here.

The recovery rebate credit is a one-time benefit for people who didn't receive the full economic stimulus payment last year and whose circumstances may have changed, making them eligible now for some or all of the unpaid portion.

Generally, a credit adds to the amount of your tax refund or lowers the amount of taxes owed. Therefore, the amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return.

You May Be Eligible

People who fall into the categories described below may be eligible for the recovery rebate credit this year:

· Individuals who did not receive an economic stimulus payment.
· Those who received less than the maximum economic stimulus payment in 2008 — $600 per taxpayer; $1,200 if married filing jointly — because their qualifying or gross income was either too high or too low.
· Families who gained an additional qualifying child in 2008.
· Individuals who could be claimed as a dependent on someone else’s tax return in 2007, but who cannot be claimed as a dependent on another return in 2008.
· Individuals who did not have a valid Social Security number in 2007 but who did receive one in 2008.

How to Get the Recovery Rebate Credit

You need to claim the recovery rebate credit on Form 1040, 1040A or 1040EZ. The instructions for these forms will show you which lines to use. Unlike the economic stimulus payment, the recovery rebate credit will be included in your tax refund for 2008 and will not be issued as a separate payment.

The IRS Will Figure the Credit for You in Most Cases

You can let the IRS figure the credit when you file your 2008 Form 1040, 1040A or 1040EZ. If you're filing on paper, simply follow the line-by-line instructions to choose this option. If you're filing electronically, the software will figure the credit for you.

Or You Can Figure It Yourself

Likewise, you can figure and claim the recovery rebate credit on your 2008 Form 1040, 1040A or 1040EZ. The worksheet in the Form 1040 instruction booklet can also help you figure your credit by hand. To complete the worksheet, you'll need the amount of your 2008 economic stimulus payment, if any. This amount was provided on Notice 1378, Economic Stimulus Payment Notice, sent by the IRS to taxpayers who received a payment.

You need to know the amount of your 2008 economic stimulus payment to determine if you are eligible for the Recovery Rebate Credit. You will need the total amount of your stimulus payment to complete the Recovery Rebate Credit worksheet that is in the Form 1040, 1040A and 1040EZ instruction booklets. Even if your payment was reduced to satisfy other debts, as would be stated on your Notice 1378, you still need to include the total. If you received more than one payment — and more than one Notice 1378 — enter the total of all payments you received.

If you don't have Notice 1378, you can use How Much Was My 2008 Stimulus Payment?

To look up the amount you received.

Has Your Filing Status Changed?

If your filing status changed for 2008, follow these directions to determine the amount of your total 2008 stimulus payment. You'll need to use this amount when you calculate your 2008 Recovery Rebate Credit.

Questions and Answers about the Recovery Rebate Credit

The following are answers to some basic questions regarding the recovery rebate credit. Check back periodically for updates and additional questions and answers that may be added.Basic Information

Q. What is the recovery rebate credit?

A. This credit is a new refundable credit that is related to the 2008 economic stimulus payment. Generally, a credit increases the amount of a refund or reduces the amount of taxes owed.

Those who did not receive their economic stimulus payment (or did not receive what they were fully entitled to) in 2008 are eligible for the credit.

Q. What is the basis of the recovery rebate credit calculation?

A. The recovery rebate credit is calculated the same way and with the same requirements as the 2008 economic stimulus payment.

The only difference is that the credit is based on the tax year 2008 income tax return and the stimulus payment was based on the tax year 2007 income tax return.

Qualifying for the Rebate. Who is eligible?

A. Those who were eligible for the stimulus payment but did not receive it (or did not receive what they were fully entitled to) in 2008 are eligible for the credit. Also eligible for the credit are those who did not meet the requirements for the stimulus payment last year but whose circumstances have since changed, causing them to now meet the requirements.

Q. Why doesn’t everyone qualify for the rebate?

A. Most taxpayers have already received their full benefit in advance in the form of the 2008 economic stimulus payment. However, if certain conditions changed for taxpayers in 2008, they may be eligible for an additional benefit.

Q: How will the recovery rebate credit payments be made?

A: The Treasury won't send out separate economic stimulus payments for 2009. Instead, those eligible will claim the rebate credit on their 2008 returns. Credits generally increase the amount of a refund or reduce the amount of taxes owed.

Q. I was claimed as a dependent on my parents’ 2007 tax return, and was not eligible for the stimulus payment, but I lived on my own in 2008. Do I qualify for the rebate?

A. That depends on whether you can be claimed as a dependent on your parents' 2008 return. The rebate is based on circumstances that occurred in 2008, while the stimulus payment was based on the 2007 tax return filing information. You'll have to use the tax booklet's worksheet on claiming the recovery rebate credit to see if you're eligible to claim it. Claiming the Credit

Q. How do I claim the recovery rebate credit?

A. Use the recovery rebate worksheet that is found in your 2008 tax booklet to figure the credit you can take, if any. Then, include that figure in the payments section of your 2008 tax return.

Q. How do I get help figuring the credit?

A. The IRS will figure the credit for you, if you enter “recovery rebate credit” next to line 70 on your Form 1040 (line 42 of Form 1040A; line 9 of Form 1040EZ). You can also access the online recovery rebate tools using the recovery rebate credit link on this Web site. For taxpayers filing electronically, the software will calculate any credit they may be due.

Q. What information do I need to figure the credit?

A. You need to know the amount of your 2008 economic stimulus payment to complete the recovery rebate worksheet. The IRS sent recipients Notice 1378, Economic Stimulus Payment Notice, which reported this amount and any reductions that were made to pay other debts. If you don’t have your notice, you can use the online tool How Much Was My 2008 Stimulus Payment?

to find the amount.

Q. My filing status in 2007 was different than it is for 2008. Does this impact the amount of the credit I can claim?

A. Maybe. That's because married taxpayers who file jointly are each assumed to have received half of the economic stimulus payment. So, if your filing status for 2008 changed to or from Married Filing Jointly or if you remarried in 2008, follow these directions to determine the amount you need to use when determining the recovery rebate credit.

Q. What tools are available to help figure the credit?

A. The IRS will post interactive tools on this Web site to help figure the Recovery Rebate Credit: the Recovery Rebate Credit Calculator and How Much Was My 2008 Stimulus Payment?

. The 2008 tax packages also include a worksheet to help figure the credit.

Q. When can I expect to receive my rebate?

A. The rebate is part of your 2008 income tax refund. The amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return. Unlike the stimulus payment, it will not be issued as a separate check. You can check the status of your refund under Where’s My Refund?

. Generally, you will receive your refund within 6–8 weeks after you file your return.

Q. I am not required to file a tax return, but I still would like to get the rebate. How do I claim the rebate?

A. You must file a tax form to claim the credit, and be sure to fill in lines 7, 20a and 70 of your Form 1040 (lines 7, 14a and 42 of Form 1040A; lines 7 and 9 of Form 1040EZ).

Q. Because the IRS applied part of my stimulus payment to an outstanding debt, I actually received less than the total amount as stated on my Notice 1378. What amount should I use when figuring my credit?

A. You must use the total amount — the amount before the deduction to satisfy the debt — as stated on your Notice 1378. That total is considered to be the amount of your stimulus payment, even though part of it was used to satisfy a debt.Economic stimulus payments received

Q. Do I have to claim my stimulus payment as income on my 2008 income tax return?

A. No, the stimulus payment is not reportable as income on your 2008 income tax return.

Q. My stimulus payment was more than what the worksheet calculates my recovery rebate credit to be. Does this mean I will have to pay the difference?

A. No, you do not need to repay the difference, and the difference will not affect your return. However, your recovery rebate credit will be zero.

Q. Will the payment I received in 2008 reduce my 2008 refund or increase the amount I owe for 2008?

A. No, the stimulus payment will not reduce your refund or increase the amount you owe when you file your 2008 tax return. The combined amount you received in the form of an economic stimulus payment plus any additional amount you receive, if any, in the form of a recovery rebate credit is independent of the normal tax you would have paid.

Q. I have no earned income and no filing requirement, but I filed a 2007 economic stimulus payment return to get the payment. Do I have to file a 2008 tax return?

A. If you received your stimulus payment, no. If you did not receive the stimulus payment, and do not pay income tax but have at least $3,000 in qualifying income for 2008, then you should file a 2008 tax return to receive the recovery rebate credit.

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