 Income tax 2021-2022, software example, recovery rebate credit, otherwise known as the RRC. Get ready to get refunds to the max, dive in in the income tax 2021-2022. Listener tax software, you don't need tax software to follow along, but you might want to have access to the forms and schedules, which you can find on the IRS website at irs.gov, irs.gov, starting point, single filer, noting that as we focus in on the credit, we're not really looking at the filing statuses per se, focusing in on them. We're really looking to go from married to non-married filing status rather than focusing in between like single and head of household, because those are going to be the major distinctions that will have an impact on the particular credit that we are looking at. So we've got Adam Smith living in Beverly Hills, 90210. We're going to start off with no dependence up top, got the 50,000 up top on the wages. They 12,550 for the standard deduction, getting us to the 37,550 for the taxable income, going then to page number two, the taxes calculated at the 4,298, and we're focused down here at the recovery rebate credit. Now note by default, for most software, there's nothing in it because the recovery rebate credit is something that they tried to give the full payment out in advance. And you can kind of tell by the way they, to me, they kind of botched up or didn't get the name quite as nicely put together as they could have because they didn't call it a prepayment. They called it just a stimulus payment or an economic impact payment instead of calling it like a prepayment, which would indicate that it's tied to the tax return, right? They just kind of sent out a check. And I think that causes confusion for some people and for a lot of people. It's a little bit confusing to tie that into the credit, which we call the recovery rebate credit. So what we're talking about here is the advanced payment or the stimulus payment or the economic impact payment for the third economic impact payment is a prepayment of the recovery rebate credit on the 2021 tax return in a similar way as the advanced child tax credit payments were prepayments to the child tax credit, which that one you can see kind of they tied it together a little bit more efficiently. They did that later and they got the name, I think a little bit more cleanly on it. So people probably have a better understanding just by the name that yes, this is the advanced payment of the child tax credit. We've seen the child tax credit before the recovery rebate credit before they started doing these stimulus checks. We hadn't seen them before and then we had this prepayment kind of concept, which is new to most people. So also note that there's three stimulus checks that have gone out. We're looking at the third stimulus check here. The first two stimulus checks have the same kind of relationship to a recovery rebate credit and the prepayment, which is the economic impact payment or stimulus check, but that is tied to the 2020 tax return. So if you're talking about the first two stimulus payments, then the remedy to fix those, if there was any problem with it is the 2020 tax return recovery rebate credit. Third payment is what we're focusing on here for the stimulus payment. The remedy for that, if there was anything wrong, would be this 2021 recovery rebate credit. Now, if everything went smoothly, you got the full payment already and you don't have any more calculation here because you got the full thing upfront and not like the advanced child tax credit where you basically got half of it if everything went smoothly. So you can see that on the notice. You should get a notice 1444C indicating how much you received. If you don't get that notice or you lost the notice, you can go to the IRS.gov website and try to log into your account where you can find that information there as well. So and some things that could cause the payment to be wrong, for example, is say your income level was higher or different, let's say in 2020, the year that they estimated as opposed to 2021, the actual numbers here, then they could get the credit kind of wrong. So let's imagine you didn't get the credit at all. If we go back on over and say, okay, I didn't get the stimulus check at all. So we're going to say I got no stimulus check. If I go back on over with the one filer, that's going to calculate at the 1400. So that kind of shows us the calculation if there was no basically prepayment involved. You can go into the worksheet and kind of check it out here. So you've got enter 1400, a single head of household, married filing separate. If married filing joint, we've got the 1400 for both people generally, 2800 for married filing joint. And then multiply times, if you have any dependence, you'd have the calculation on that and then you'd have a prepayment. And there's also a phase out that's taking place at 75,000. You can see kind of the limit here. So if I put this, for example, if I was to increase this to, let's say my income, let's bring my income up to like, to like 77,000, for example. And then go back on over. Now it's being phased out and you can so you can see what that phase out looks like. So it's possible, for example, that your income was over that threshold for the calculation in 2020 resulting in you only getting, let's say, sent $840. But if you actually did the calculation in 2021 based on the current information on the tax return, then maybe your income was lower and that that's a result that could result in you needing, you know, the recovery rebate credit being the remedy for that situation. So let's take a look at that. If I was to say, let's say that my income was back down to 50,000. So if I got no, if I got no prepayment, then the calculation would be for 1,400. So if I go back into my, if I go back into my detail here and I, and I go and let's jump, let's jump there. Actually, I was right there already. So if I got the full 1,400, you know, obviously, then nothing would be here because I got the money already. But if I only got the 840, for example, based on prior year, because it was an estimate and possibly I had that income threshold. Now the difference is what I'm getting the remedy or the recovery from here. So you can see that difference being the calculation. That's when it would come into play. That's one reason it would come into play. Either you didn't get it at all for whatever reason or they possibly, they messed up the income threshold because they based it on a prior year and they would remedy that. Now, the funny thing is you would think that if you got, let's say you had a dependent on the prior year tax return that would double the credit to 2,000. Let's say it was 2,800 that you got. But then on the current year tax return, you didn't have that. You didn't have that dependent because let's say it was a split custody situation. So last year, you had a dependent that qualified you for a higher credit than the 1,400, but then in the current year, you didn't have that dependent. So then they gave you too much on the credit. And if you go back down here, look at the calculation. They didn't make me basically pay it back here, right? You got the 1,400. I got the 2,800, the recovery, repaid credit subtract line 13 from 12. If zero or less, enter zero. So notice they're kind of incentivized. And this kind of makes, it's kind of funny, but I don't think it's a good that the IRS does, they're doing this kind of often. They keep on incentivizing people to basically make errors, right? So now they all, you know, you could have called them up and say, don't send me the payment because, I mean, you could have tried to not give them, have them overpay the payment. But the incentive here is to have them make a mistake on the upside. And they've done that with a few different things now, which I think is not, you know, setting a good precedent. But in any case, if you overpaid, you know, it could be a benefit because they're not making you, they're not showing you to pay it back here. Okay, so let's go back on over and let's do the calculation. Let's say we didn't get anything. And let's say that now the calculation's at the 1,400. Now, if they were married, if we were married, then you would say single to married. And so now you got Adam and Eve. Adam and Eve are married now. You go down and you could say then page two, if they both didn't get anything, then I would double the credit, right? You get the 2,800. So here's the calculation. And then if only one of them got the credit or if there was a phase out and you didn't get the 2,800 on the forms or notices 1,444C, then you could go back on over and say, if I didn't get the full amount for whatever reason, let's say the first one got the amount and then the spouse didn't get the amount, for example, but should have got the amount. Let's do that again. Let's say the first one got 1,400 and spouse is 0, 1,400 and 0. So now you got the 1,400 that would still be received in that case. Let's take that off and let's just add a dependent just for the fun of it. Let's add a dependent. Let's say we had a dependent on our return, Sam, our son. This is our son, Sam. Sam's a good man, a good young man. He's still a dependent. But Sam, there's Sam. Page one married. Now we've got the dependent. So we got three people involved. And so now you've got your calculation. If I said we didn't get any, if I didn't get any, any payment, negative one, negative one, then it would be at the 4,002 because we basically have three people, right? So 2008 and then so, I mean, if we pull up the trustee calculator, there's calculations are for calculators. It's the 1,400 times three now, 4,200, right? 4,200 we would have got. Now what if that one child was like a new child? Like they were born in 2021. They wouldn't have been on there in the prior year in that case, possibly. So then maybe we didn't get paid for that third one and maybe we got 1,400 and 1,400. But we should have got the other one. Now we've got that 1,400 that would still be needing to be received for Sam in that case. And that's another area where they could have got it wrong. If there's a joint custody situation, if the child is going from one parent to the other, they might have applied the payment to the wrong person. And again, I think they incentivized it to make that error on purpose because if they sent it to the wrong person and they got the money, then you notice it didn't result in the overpayment needing to be paid back. And then the other person would properly report the dependent possibly and you'd double up on it there. So it's kind of a fun, maybe. I don't, that's just, I'm just, that's what I'm thinking here. But in any case, that's one area that it could have gone wrong and the income thresholds, it could have gone wrong. Now notice the income threshold now. If I go back to, let's go back to the original. Let's get rid of the dependent. Sam's not our dependent anymore. Sam has, is not the dependent now. And then let's go back to, and let's go back here and say, say that we've got nothing. We didn't get anything for, for a taxpayer and taxpayer. So that would be the 2,800. And let's say that the income threshold goes over the threshold, which for married filing joint was married filing joint. If our income goes above the threshold of let's say like 157,000. So if I go on married filing joint and I'm at 157,000 and then 1,000 and I go to page two then, then you can see it starts to phase out with that income threshold, which again is another reason why, why it could, something could have been wrong on the economic impact. And because you might have been hitting the threshold or not hitting the threshold in the prior year and either hitting the threshold or not hitting the threshold in the actual year 2021, meaning they're going to get the number wrong. Cause if they base it on the 2020 number, if there's a threshold kind of component with the income threshold involved. So that's the general idea with the recovery rebate credit. Just remember recovery rebate credit is tied to the stimulus payment and it's just there to kind of.