If you’ve recently received a letter from the IRS stating that they “found a miscalculation on your Form 1040” caused by the Recovery Rebate Credit, keep reading.
You’ve been waiting on a delayed refund for months and months, and then you receive a letter saying there was a “miscalculation,” and your refund has been decreased–or even worse–you now owe!
Could There Be Anything More Frustrating?
In almost every case I’ve seen, these letters are triggered by reporting incorrect stimulus amounts on your 2020 Form 1040, resulting in a Recovery Rebate Credit. This Recovery Rebate Credit was the government’s way of getting stimulus funds to people who didn’t receive the correct amount when they were initially sent out.
If you did receive the total amount owed to you for the first two 2020 stimulus payments, this letter is correct, and there’s no further action you need to take. However, if you now owe a tax bill, go ahead and pay it.
If you Did Not Receive the Total Amount…
If you did not receive the total amount owed to you, start creating an IRS account to check your tax account information. If you’re married, both spouses will need to create an account, and it should show the stimulus payment amounts for each person, not the married couple as a whole.
You will also want to match up what that website says to what was deposited into your bank account by the IRS.
Send this documentation to your tax preparer if you did not receive the total stimulus payments for #1 and #2 of 2020. Your tax preparer can then assist in writing a response letter to dispute the changes.
If you have any questions or want to discuss this further, please Book Your Free Assessment Here.