How to Claim Recovery Rebate Credit on 2008 Tax Return

Early last year, the government sent taxpayers an economic stimulus tax rebate check, which is now called Recovery Rebate Credit, up to $1,200 (of course, you had to file 2007 tax return to be eligible for the rebate) as part of the efforts to revive the economy. And by now we already know that the rebate payment is not taxable, which means you are going to be taxed for the amount you received. However, not everybody received the full payment. For us, even though we have two children, we only received a little over $200 in tax rebate, which is far less than the $1,800 maximum amount, because of our income level in 2007. For some, changes of their circumstances in 2008 also mean they may be able to reclaim part, or all, of the credit when filing their 2008 federal tax returns. Now with the Recovery Rebate Credit, we may get some more back this year. According to the IRS, people who may be eligible for the tax credit include:

  • Individuals who did not receive an economic stimulus payment.
  • Those who received less than the maximum economic stimulus payment in 2008 because their qualifying or gross income was either too high or too low.
  • Families who gained an additional qualifying child in 2008.
  • Individuals who could be claimed as a dependent on someone else’s tax return in 2007, but who cannot be claimed as a dependent on another return in 2008.
  • Individuals who did not have a valid Social Security number in 2007 but who did receive one in 2008.

Looks like we met the second criterion :) In order to get the credit, you will have to do it right on your 2008 federal tax return form. To help taxpayers correctly claim the Recovery Rebate Credit, the IRS has published a few tips to make the process easier for taxpayers:

1. Get your notice. Check the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment.

2. Visit IRS.gov to find the amount. If you don’t have your Notice 1378, go to the “How Much Was My 2008 Stimulus Payment?” tool that is available on the IRS Web site, IRS.gov. This tool can provide the correct amount in a matter of a few seconds.

3. Call the IRS at 1-866-234-2942. If you don’t have Internet access, call the IRS. After a brief recorded announcement, select option one to find out the amount of your economic stimulus payment. You will need to provide your 2007 filing status, Social Security Number and the number of exemptions claimed on the tax return.

4. Keep the amount handy. With the amount of last year’s economic stimulus payment in hand, you will be able to enter the figure on the recovery rebate credit worksheet or in the appropriate location when your tax preparation software requests it. This number will not appear on your actual tax return but is vital to ensure the accurate determination of the recovery rebate credit amount.

5. Trust the software or the worksheet to get it right. Tax preparation software will automatically and correctly calculate the amount of the rebate recovery credit for you. The software will also properly report the credit on your tax return. If you are filing a paper return, the worksheet will guide you in calculating the proper amount of the credit. The recovery rebate credit should be reported on Line 70 of Form 1040, Line 42 of Form 1040A or Line 9 of Form 1040EZ. In order to avoid an error, use extra care when responding to the software questions or when completing the worksheet. Do not enter the stimulus payment directly on your return.

6. Most taxpayers won’t qualify for more. For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero because they have already received the money as a stimulus payment. If you complete the worksheet, and there is any question about the amount that should be reported for the recovery rebate credit, you or your preparer should enter a zero on the appropriate line above. For most people this will be the correct amount, and for the others the IRS will determine whether a recovery rebate credit is due and, if so, how much. If the IRS calculates a different credit amount than is reflected on your return, you will receive a notice that alerts you to the change.

I am using TurboTax to file our tax return this year, as we did in the previous couple of years. I haven’t got to the step to claim the credit it yet, but, like the IRS suggested, I am going to trust the software to get it rigth :)

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