February 14, 2022
Did you get all of your 2021 Economic Impact payments?
If not, you should have received Letter 6475, which the Internal Revenue Service began issuing in late January, that offers details about your 2021 Economic Impact Payment.
The IRS letter can help tax filers determine whether they are owed more money and if they are eligible to claim the Recovery Rebate Credit on their 2021 tax return when they file a return this year. Even if you are not owed additional money, you’ll still need the letter to report any stimulus payments on your taxes.
(If you have any tax questions, feel free to contact the office of Louis Mamo & Company. We can can answer any of your questions and help you get through the 2022 tax season.)
If you received the advance child tax credit payments as many families did, you’ll also need another letter before filing your taxes: IRS Letter 6419. However, be warned, some letters have inaccurate amounts, so you will want to confirm your letter is correct.
The IRS said tax filers also can check the amount of their payments in their Online Account, which has to be set up on IRS.gov in addition to the letters for both stimulus payments and child tax credits.
Did I get a third stimulus payment?
Most received third stimulus payments in March 2021. The IRS also issued what were called “plus up” payments – or extra money in addition to the initial direct deposit or stimulus check issued last year – for millions but, not all, of taxpayers who qualified for the stimulus money.
The third stimulus payment was viewed as money you received in advance of the Recovery Rebate Credit that you might be eligible to claim on a 2021 federal income tax return.
How much is the Recovery Rebate Credit for 2021?
This tax season, you want to make sure that you’ve received the full amount of the third stimulus that you’re entitled to receive. You need to file a 2021 federal income tax return to claim the Recovery Rebate Credit if you’re owed more money.
The maximum Recovery Rebate Credit on 2021 returns amounts to $1,400 per person, including all qualifying dependents claimed on a tax return. A married couple with no dependents, for example, could qualify for up to $2,800.
Who is eligible for the rebate credit? Parents of babies born in 2021 and more.
Plenty of things could have changed in your life since you filed 2019 or 2020 federal income tax returns. If a new child joined the family in 2021, for example, you’d want to claim the Recovery Rebate Credit to claim up to $1,400 owed for that child.
The parents would need to be able to claim the child as a dependent on their 2021 income tax return and qualify based on income limits for the credit.
What does IRS Letter 6475 look like?
These letters started going out in late January and say, “Your Third Economic Impact Payment(s)” in bold lettering at the top. You can also find the terms “Letter 6475” on the bottom at the very righthand corner.
Earlier in the program, the IRS sent out a “Notice 1444-C” that shows the third Economic Impact Payment advanced for tax year 2021. If you saved that letter last year, you can refer to it, as well.
If you received stimulus money at various points during the year, you might have more than one notice. Letter 6475 gives you a total dollar amount.
How can I find out Economic Impact Payment amounts without the IRS letter?
A tax filer can go to “Your Online Account” at IRS.gov to view your Economic Impact Payment amounts.
Where is the Recovery Rebate Credit on the 1040 tax form?
The Recovery Rebate Credit is found on page two, Line 30 of the 1040 tax form for 2021.
Is the third stimulus check considered income?
No. The Economic Impact Payment is not considered to be taxable income. “And you shouldn’t report it as income on your 2021 federal income tax return,” according to Letter 6475.
You also do not need to repay any of the third stimulus payment money that you received. That’s true even if you’d qualify for a smaller payment based on what you’d calculate for your 2021 Recovery Rebate Credit.
What is the fastest way to get stimulus payment and tax refund?
File electronically, instead of a paper return, to avoid delays. Make sure the return is accurate, reflecting complete information regarding the advance payments for the child tax credit and the third stimulus payment. Have your tax refund directly deposited into a bank account to avoid mail delays.
Who is not eligible for the Recovery Rebate Credit?
If you received your full amount in advance through the third stimulus payment, you would not qualify for any more money when you filed the return and you do not claim the Recovery Rebate Credit. Filing incorrectly for the credit could also delay your tax refund.
Here’s how to get a faster refund
Even though tax returns started getting filed on Jan. 24, there still may be refund delays as the IRS combats a backlog and limited staffing, according to Treasury officials.
However, there may be ways to get your money faster, financial experts say.
Although refunds are typically sent within 21 days, many filers waited longer last year, and at the end of December the IRS still hadn’t processed millions of individual returns that were submitted.
“Those numbers are just alarming,” said certified financial planner Larry Harris, director of tax services at Parsec Financial in Asheville, North Carolina.
While electronic filing with direct deposit is a perennial tip, here are some other ways to speed up your 2021 refund, according to tax experts.
Check your return for errors
One of the easiest ways to avoid refund delays is double-checking your return, experts say.
“Half of the problems are from taxpayers not providing accurate information,” said Eric Pierre, an Austin, Texas-based certified public accountant, owner of Pierre Accounting and co-host of the CPA Huddle podcast. “The IRS is a hot mess, but you’re not helping yourself with errors.”
The backlog of unprocessed returns includes issues triggering a manual review, according to the IRS, including many stimulus check mistakes, and the agency is fixing “significantly more errors” than in previous years.
There may be similar issues as the IRS tries to reconcile the 2021 stimulus check and advance child tax credit payments, Harris said.
“I have concerns it’s going to create another significant backlog in addition to the backlog that already exists,” he said.
However, the IRS is sending forms to help filers who received these funds: Letter 1649 for child tax credits and Letter 6475 for stimulus checks.
If these letters match your return, it’s less likely to get marked for review and delay your refund, Harris said.
The same goes for quarterly estimated payments and other tax forms, such as your W-2 for income or 1099-R for retirement plan withdrawals. If you’re missing paperwork, you can download your free IRS transcript to verify forms or numbers from last year’s return.
Experts also suggest using an IRS transcript to double-check the amounts from your child tax credit and stimulus check letters.
If you claim the earned income tax credit or additional child tax credit, you can expect your refund by early March, according to the IRS.
Identity theft delays
Another issue that may cause tax refund delays is getting flagged for identity theft.
The IRS marked 5.2 million refunds for fraud in 2020, according to the Taxpayer Advocate Service, with 1.9 million stopped for identity screening.
If the IRS suspects fraud, they will mail Letter 5071C or 6331C, halting the return until getting a response. And the process takes longer if it goes to the wrong address, Pierre explained.
“A lot of people make errors keying in their apartment number or forget they have moved recently,” he said. “And mail forwarding doesn’t always catch stuff.”
However, you can avoid extended delays by ensuring the IRS has your up-to-date contact information.
After getting the letter, you may verify your identity online, by calling the number provided or visiting a local IRS office. But reaching the IRS may not be easy.
There were fewer than 15,000 workers to handle the 240 million incoming calls during the first half of 2021 — one person for every 16,000 calls — according to Treasury officials.
(sources: USA Today, CNBC, IRS.gov)