What to do with IRS Letter 6475 (Recovery Rebate Credit)

February 03, 2022 by Carolyn Richardson, EA, MBA
IRS check with money surrounding it

Here at TaxAudit, we have started receiving phone calls from our members about receiving an IRS Letter 6475. Since we always say, “Call us if you get any letter from the tax agencies!” it’s good to know that our members are doing so! But is this really a notice you need to worry about? As “The Hitchhiker’s Guide to the Galaxy” used to say, “Don’t panic!” The IRS does sometimes send letters that don’t require assistance, and Letter 6475 is one of these.

Why is the IRS issuing Letter 6475? You may recall back in the spring of 2021 that Congress passed the American Recovery Plan Act (ARPA), which authorized the issuance of a third round of Economic Impact Payments (EIP). This payment was equal to $1,400 for an eligible taxpayer with a valid Social Security number (and their spouse if filing a joint return). It also paid out $1,400 for each eligible dependent with a valid Social Security number or Adoption Taxpayer Identification Number (ATIN). These advance payments were actually advance payments of a tax credit passed in the ARPA, called the Recovery Rebate Credit. Unlike the previous rounds of advance payments, these payments phased out far more quickly once taxpayers reached an income threshold. But, like the previous payments made in 2020, the amount of the advance payment was determined by the income reported on either your 2019 return (if you had not yet filed your 2020 return), or your 2020 return if it was filed at the time the payments were issued.

So now that you have your Letter 6475, what should you do with it? Well, don’t throw it away! At least, not just yet. The letter will inform you of the amount that the IRS paid to you for the third EIP payment. You should confirm that the amount reported in the letter is the same amount that you received, i.e., $1,400 for you (and $1,400 for your spouse, if married), and $1,400 for each dependent you claim on your return. If you received less than those amounts, or didn’t receive anything at all, then you may be eligible to claim the Recovery Rebate Credit when you file your 2021 federal income tax return. When preparing your tax return, you will want to enter the amount of the EIP that you received so that if you received less than you were entitled to, the software can calculate the correct amount of the Recovery Rebate Credit. Likewise, if you received advance payments of your Child Tax Credit, you should receive Letter 6419 to report those payments to you as well, and there is also information you will need to have to accurately prepare your federal tax return. You can learn more about that in this blog.

Now the good news – while you do need to enter the amount of the economic impact payment you received when preparing your return, this is only so the IRS can determine if you should have received more than you actually got. If you got more than you should have, usually because your income was too high in 2021 to receive the Recovery Rebate Credit, you do not have to pay back any of the amount you received. And the amount that you received is not taxable income to you. The rules are slightly different for advances on the Child Tax Credit, though, so be sure to read our blog on that topic!

It’s important to report the correct amount of the advance payments received, as failing to do so could result in delays in processing your return. If you are getting a refund, those delays can be extremely frustrating - particularly if you are waiting for that money to pay for other bills. With the IRS still very backlogged from the 2020 shutdown due to the coronavirus, you’ll want to avoid errors that will require them to do more research after you file your return. And it’s more important than ever to e-file your tax return, if you can, as filing a paper return will mean your refund could be delayed for months. The IRS has reported that they still have over 6 million 2020 tax returns to process that were filed last year, and you don’t want to end up in that queue.

If you do need to get information from the IRS, such as confirming your payments, making payments, or checking a refund status, it’s best to use the online tools available at IRS.gov rather than trying to call the IRS right now. If you haven’t set up your online account with the IRS to streamline access to your tax information, now would be a good time to do so. You will need a cell phone in your name to complete that process, which you can find out about here. This process uses ID.me to verify your identity, and most taxpayers will be able to complete the process in about 15 minutes.

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Carolyn Richardson, EA, MBA
Learning Content Managing Editor

 

Carolyn has been in the tax field since 1984, when she went to work at the IRS as a Revenue Agent. Carolyn taught many classes at the IRS on both tax law changes and new hire training. In 1990, she left the IRS for a position at CCH, where she was a developer on both the service bureau software and on the Prosystevm fx tax preparation software for nearly 17 years. After leaving CCH she worked at several Los Angeles-based CPA firms before starting at TaxAudit as an Audit Representative in 2009. Carolyn became the manager of the Education and Research Department in 2011, developing course materials for the company and overseeing the research requests. Currently, she is the Learning Content Managing Editor. 


 

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