Hello Taxware Clients,
We have received a few questions regarding how to select or set a tax return as an EIP filing only return. We think the confusion comes from the IRS requirements in the 2019 tax year.
In the 2019 tax program there were flags to indicate that a tax return was being filed “EIP2019”. This indication was for taxpayers that were not required to file but wanted to give the IRS their information so they could receive an EIP payment.
We have received further clarification from the IRS regarding how to file these NRF tax returns for this tax year 2020. If your tax client is eligible and either didn’t receive the Economic Impact Payments, or if you think they qualify for more than they received, you’ll need to file a 2020 tax return and claim the Recovery Rebate Credit even if you otherwise are not required to file a tax return.
If the return has an amount in the payments section, like the RRC would provide, then the tax return does not have to have an amount in income that would flow through to AGI. This is different than in prior years when the IRS directed that $1 dollar be put into the taxable interest and dividends section. This step is no longer applicable.
To summarize their information, a tax return needs to be prepared and filed in a normal fashion with NO additional “EIP2020” flags or indicators.
From the IRS:
Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 Form 1040 or 1040-SR. To determine whether you are an eligible individual or the amount of your Recovery Rebate Credit, complete the Recovery Rebate Credit Worksheet in the Instructions, Line 30, for Form 1040 and Form 1040-SR.
File as a traditional return with no “special” requirements
- Filing Status – what the taxpayer qualified for in tax year 2020
- List all Dependents
- Select the Child Tax Credit or Other Dependent checkbox for each dependent
- $1 for Taxable Interest Income, Total Income, and AGI is NOT applicable
- Indicating “EIP2020” is NOT applicable
Previous Non-Filer, $1 amount in Interest, Total Income and AGI was necessary to bypass the existing business rule but no longer necessary for claiming RRC.
RRC flows to Total Payments satisfying the rule requirements
A non-filer that did not “register” on the portal or received zero EIP, should complete Form 1040, line 30 RRC worksheet and file a traditional return
Your return must be complete and correct. Even if you don’t have a tax return filing requirement, you may be eligible to receive additional credits based on your filing information by including the amount of your income and information about a spouse or any dependents. Filing electronically is the fastest and most accurate way for you to file.