IRS Letter 6475 can help you claim any extra stimulus cash owed: 5 things to know
The third round of stimulus cash — sent from March through December last year — has already been spent by many families.
But the stimulus program lingers into tax season, as we're dealing with new letters and potential tax credits. And if you're missing money, you want to pay even more attention.
The Internal Revenue Service began issuing what it calls Letter 6475 late in January. It's a letter that offers details about your Economic Impact Payment in 2021.
The letter can help tax filers determine whether they are owed more money and discover whether they're eligible to claim the Recovery Rebate Credit on their 2021 tax return when they file a return this year. Many people already received the full amount but others did not.
What could be confusing?
The Recovery Rebate Credit isn't completely new. It was offered on 2020 tax returns filed last year for the first two pandemic-related stimulus payments available in 2020.
But, "there was no Letter 6475 last year," said Mark Steber, Jackson Hewitt’s Chief Tax Information Officer.
Steber said this new letter is designed to help tax filers better figure out how much they actually received for the third stimulus payment last year.
"It will be pretty important for anyone who is unsure or due more money," Steber said.
Last tax season, millions of mistakes were made on 2020 returns regarding the first two stimulus payments, triggering extra problems and longer delays in receiving refund cash.
Data submitted by tax filers didn't match what the IRS had on file for stimulus payments because some filers made mistakes or rushed too quickly to file their returns.
"They guess-timated, they estimated, they weren't sure. They tried to double-dip. They weren't positive of the amount," Steber said.
Some people wrongly claimed the full Recovery Rebate Credit on 2020 returns even though they had received all of the money they were eligible to receive in two rounds of stimulus payments in 2020.
The IRS has warned tax filers this year to be absolutely certain that the amounts you received last year for the monthly advance child tax credit payments and the Economic Impact Payment match up with government records and are entered correctly on the 2021 federal income tax return.
If your data doesn't match, you end up in the IRS error resolution pile and you're not going to be a happy camper.
"Incorrect entries when reporting these payments mean the IRS will need to further review the tax return, creating an extensive delay," the IRS stated.
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.
Key point: 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.
What could be confusing for some people this tax season is that the third stimulus payment didn't just arrive all at once for some families.
The IRS 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.
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Some people received a smaller amount in March or April last year, based on their 2019 tax returns. Later in the year, they received a "plus up" payment after filing a 2020 income tax return. They could have qualified for additional stimulus cash, for example, if their income dropped during the recession in 2020 and they qualified for more money based on their 2020 return.
Some of these "plus up" payments also went out to people who received money initially based on their information received from the Social Security Administration, Railroad Retirement Board or Veterans Affairs.
The IRS Letter 6475 gives you a complete picture of the total amount of money received for your 2021 stimulus payment or payments last year.
It could be tougher to just calculate any potential credit by only reviewing your bank statements if you didn't receive the full amount all at once.
Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting, said some people also could make a mistake if they try to include money they received for their second stimulus payment in their calculation for the 2021 tax return.
The second stimulus payment was paid out late in 2020 — the IRS began mailing checks on Dec. 30, 2020. For some people, the money could have arrived in early 2021 but it's not part of the Recovery Rebate Credit calculations on the 2021 return.
By referring to Letter 6475, you could avoid any confusion about what payments should be included and what payments shouldn't on the 2021 return.
Why does this matter?
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.
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.
Plenty of things could have changed in your life since you filed 2019 or 2020 federal income tax returns.
If a new baby was born in your 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.
The Recovery Rebate Credit is found on page two, Line 30 of the 1040 tax form for 2021.
The income phaseout for the Recovery Rebate Credit will mean that many people who were working in higher paying jobs in 2021 won't qualify. The 2021 credit heads to $0 more quickly than on last year's return.
A single person, for example, cannot claim any credit with an adjusted gross income of $80,000 or more.
A married couple filing a joint return cannot claim any money for the Recovery Rebate Credit with an adjusted gross income of $160,000 or more.
The phaseout for a smaller credit begins above $75,000 for singles and $150,000 for a married couple filing a joint return.
What does Letter 6475 look like?
The letter says, “Your Third Economic Impact Payment(s)” in bold lettering at the top and you'd find the terms "Letter 6475" on the bottom at the very right-hand corner.
These letters started going out in late January.
If you received the advance child tax credit payments and a stimulus payment in 2021, as many families did, you're going to need to hold onto two types of different letters from the IRS — Letter 6419 for the child tax credit and Letter 6475 for the third stimulus payment.
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, though, you might have more than one notice. Again, Letter 6475 gives you a total dollar amount.
Do I have to include my third stimulus as 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 should I do if I lost this letter or don't get it?
A tax filer also can go to "Your Online Account" at IRS.gov to view your Economic Impact Payment amounts. Again, you want to handle this carefully because making a mistake will trigger delays.
ContactSusan Tompor: firstname.lastname@example.org. Follow her on Twitter@tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.