The Recovery Rebate Credit

(What I Learned After 90 Minutes on the Phone with the IRS)

Yesterday, I was on the phone with the IRS for an hour and a half. Yes, 90 minutes. Not all of it was talk time, of course – it took 30+ minutes just to connect with a live person. But in resolving a 2019 tax issue (hallelujah!), I was on hold and speaking with an agent for 90 minutes. In the end, it was worth it because I resolved the issue I originally called in for. I was also able to get some valuable information on an issue another client and some colleagues were experiencing – refunds connected to the Recovery Rebate Credit. I’ll explain below.

The Recovery Rebate Credit

If you’re unfamiliar with the Recovery Rebate Credit, don’t feel stupid; it’s a brand new credit for the 2020 tax year. The credit is related to the 2020 and early 2020 economic stimulus payments . Because these payments were based on prior tax year information, some did not receive the correct amount of stimulus payments. For example, if you had a child during 2019 or 2020, you may have received the stimulus payment for one fewer dependent than you should have.

Taxpayers can claim the amount of the shortfall on their 2020 tax return via the Recovery Rebate Credit. They need to provide their tax preparer the amounts actually received for the first two stimulus payments. Tax software such as TurboTax and H&R Block also have the ability to do this. The software will ask for these amounts and calculate your credit.

Recovery Rebate Credit Refunds: A (Tax) Traffic Jam

As I said, the information I received yesterday was relevant to a return I filed earlier in the tax season. I have seen about a one week turnaround, between e-file acceptance by the IRS to when the taxpayer receives their refund, in most 2020 returns. However, one particular client, the first return I filed this season, still has not received their refund to date.

Whenever the Recovery Rebate Credit is claimed on a return, that return is automatically flagged for manual review by an agent. This manual review process could take approximately ten weeks to complete. This explains the lag (for at least my client, but I suspect others as well) in receiving the tax refund. Complicating things further, the IRS is still dealing with major delays in catching up from last year’s Covid-impacted filing season. According to the same IRS agent, there are still 7 MILLION PIECES of unopened mail at the IRS! If you were an unlucky soul that had to paper file, for whatever reason, good luck to you and your patience if you are still dealing with 2019!

Patience, Patience, Patience

In conclusion, if you’re still waiting on your refund for a similar reason, unfortunately you’re going to have to be patient just a little bit longer. You should wait ten weeks from e-file acceptance by the IRS. If you still have not received your refund after ten weeks, then you should try to call the IRS and talk to someone about your return. Unfortunately, the wheels of government grind very slowly, and when you throw the wrench of Covid restrictions on top of bureacracy, we’re talking turtle speed. Ultimately, though, you will get your refund. And as always, if you have questions about this, always feel free to schedule a complimentary session with me!