The information in this article was last updated on Jan. 10, 2021. This article relates to the tax laws enacted during the COVID-19 pandemic. These laws may have expired or reverted to their original state. For the most recent updates, please see The 2021 Recovery Rebate Credit.
To help offset the financial impact of COVID-19 for individuals across America, the U.S. government issued two* rounds of economic impact payments (stimulus checks). The first was worth up to $1,200 per qualified adult in each household, plus $500 for each qualifying dependent. The second was for up to $600 per qualified individual in each household.
Your eligibility to receive these stimulus payments was based on your household AGI. The IRS looked at your 2019 (or 2018) tax returns to determine whether you qualified for the payments at the time of distribution.
For tax year 2020 (the return you’ll file in 2021), a new line has been added to the Form 1040/1040-SR for a “Recovery Rebate Credit.” This is where taxpayers will indicate if they received stimulus payment(s) and how much. If you are owed any money, it will be given to you in the form of a refundable tax credit, meaning it will be included in your tax refund.
*The Recovery Rebate Credit for tax year 2020 is calculated based on the first two stimulus payments and does not account for the third stimulus.
Who qualifies for the Recovery Rebate Credit?
Eligible tax filers who did not receive one or both of the stimulus payments can claim the Recovery Rebate Credit on their 2020 tax return (filed in 2021). Individuals who have experienced a life change since the first round of stimulus payments were issued may also qualify. This could be due to a decrease in income or the birth of a child in 2020, for example.
How does a refundable credit replace a stimulus payment?
When you have a refundable tax credit with an amount greater than your taxes due, the difference gets added to your tax refund. Learn how tax credits and deductions work.
How do I report my stimulus payments on my 2020 tax return?
As part of the filing process this year, you will be asked to enter information about the stimulus payment(s) you received (if you received any). This step simply ensures that you have received the full amount you are entitled to and will help calculate your Recovery Rebate Credit (if you are eligible). It will not increase your taxable income or taxes due. See instructions for claiming the credit using TaxSlayer.
Note: The stimulus payments are not taxable, so the amount you received does not get reported as income on your return.
How do I claim the Recovery Rebate Credit on my 2020 tax return?
TaxSlayer will automatically determine if you’re eligible and calculate the Recovery Rebate Credit for you when you enter the stimulus payment amount(s) you have received or indicate that you haven’t received any payments.
Do I have to pay back the stimulus when I file my taxes?
No. The payment(s) you received will not increase the amount you owe when you file your 2020 federal tax return.
What happens if I get the stimulus after I claimed the RRC?
If you received your second stimulus payment after you filed your 2020 return, the IRS will automatically adjust your 2020 tax refund before they send it to you. This could mean the refund you receive is lower than you expected.
I claimed the RRC. Why was my refund lower than expected?
Stimulus checks are still being delivered to some households. If your stimulus check arrives after you filed your return, the refund amount you were expecting will be reduced. The IRS will automatically lower your refund to prevent a double payment. You will either receive the RRC or the stimulus check you are due – but not both.
Note: At this time, the Where’s My Refund tool on the IRS website will not reflect the change in your refund if you are affected. Instead, the IRS will contact you by letter, explaining why your refund was automatically adjusted.
Was the stimulus an advance on my tax refund?
No. Your refund will not be reduced because you received a stimulus payment. They are entirely separate.
I earned more money in 2020. Will I have to pay back the stimulus?
No. If your income increased in 2020 compared with 2018 or 2019, you still won’t be required to pay back the stimulus money you previously received.