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Felicity S. Miller

Date: April XX, 2022

Preparer: Felicity Miller

Reviewer: Felicity Miller

Subject: 2021 Recovery Rebate

I am following up on our meeting over the phone concerning the 2021 Recovery Rebate credit. You were interested in learning about the 2021 Recovery Rebate credit and concerned to what extent you and your spouse were eligible for this credit and whether the credit that you received in 2021 is taxable on your 2021 tax return.

In March of 2021, the Under American Rescue Plan (ARP) Act was passed. The ARP Act entitles individuals with income under a certain level to receive a recovery rebate tax credit. These are direct payments to individuals by the government.

Single individuals and joint filers are entitled to a payment of $1,400 for each eligible individual. An eligible individual is any individual other than (1) a nonresident alien, (2) a dependent of another taxpayer, and (3) an estate or trust. For these purposes, the term "dependent" includes not just children but qualifying relatives. The 2021 recovery rebate began phasing out starting at $150,000 for married filing joint filers and is completely phased out at $160,000 for married filing joint filers.

The government began issuing the rebates based on 2019 income tax returns or 2020 returns for individuals who filed their 2020 returns on time. The calculation for the correct amount of the rebate will be part of your 2021 tax return. If your 2021 tax return indicates a rebate larger than the amount you received any additional amount will be claimed as a credit against your 2021 tax bill. On the flip side, if the 2021 rebate calculation shows an amount in excess of what you were entitled to, you do not have to repay that excess. The difference, if any, between what you received and the actual credit you were entitled to will be a result of factors that affected your 2021 income. These factors may include changes such as retirement from a job, the birth of a child, a child going to college, etc.

If you have any questions, please call our office and we can discuss further.

Thank you,

Felicity Miller, CPA