IRS Offers Tips To Avoid Confusion About RRC
Sat Feb 7, 2009, 12:22 am | 6 Comments
IRS, on January 30, 2009 posted an explanation on its website about how to avoid the confusion Recovery Rebate Credit (RRC). Many people have already filed their tax returns. According to IRS, about 15 percent have errors involving the recovery rebate credit.
You may be eligible to receive the recovery rebate credit if:
- You did not get the economic stimulus payment last year
- A smaller number of those who did receive
- However, most taxpayers who received the economic stimulus payment last year will not qualify for the recovery rebate credit on their 2008 federal income tax return.
IRS says:
- Some tax returns erroneously claim the credit
- Do not claim the proper amount of recovery rebate credit
- Mistakenly enter the amount of the stimulus payment they received on the recovery rebate credit line.
It is absolutely essential that taxpayers know the correct amount of the stimulus payment they received last year, if any, to help determine whether they qualify for the recovery rebate credit now.
Find out how much you received last year
There are three ways individuals can find out how much they received:
- Check the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment.
- How Much Was My 2008 Stimulus Payment
- Call the IRS at 1-866-234-2942. You would need filing status, Social Security Number and number of exemptions.
Enter the amount
Enter the amount on the recovery rebate credit worksheet or in the appropriate location when tax preparation software requests it.
- Tax software: You have no problem. The software will do the calculations for you.
- Paper method: RRC, as determined through the worksheet, should be reported on
- Line 70 of Form 1040
- Line 42 of Form 1040A
- Line 9 of Form 1040EZ.
For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero. In any case if you are not sure, enter zero and let IRS figure it out.
Some criteria for qualification
According to IRS, some of the major factors that could qualify you for the RRC include:
- Your financial situation changed dramatically from 2007 to 2008.
- 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.
Clearing confusion
The IRS clears the confusion as follows:
- The economic stimulus payment is not taxable and it should not be reported as income on the 2008 Form 1040, 1040A or 1040EZ.
- You should not use your regular refund from last year in calculating the recovery rebate credit. Some taxpayers may be confusing their regular tax refunds with the economic stimulus payment they received when completing their 2008 tax return.
- Taxpayers who request a direct deposit will receive the refund in the form of a direct deposit even if errors are detected.
Related Items
Financial success
As always, if you want to be on a path of financial success:
- Pay special attention to your personal finances.
- Get your free annual credit report now.
- take steps to improve your credit score.
- To invest, find a good financial adviser.
- To be debt-free, find a good credit counselor.
- To file taxes, find a good tax preparer.
- Take steps to ensure your financial adviser is trustworthy.
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- Highlights of 2008 tax law changes
6 Responses to “IRS Offers Tips To Avoid Confusion About RRC”
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