Recovery Rebate Credit

[Chester12]

Is eligibility for this credit on my 2021 taxes based on my 2020 AGI or my 2021 AGI?  I am getting conflicting information.  The TurboTax Stimulus Hub questions were all based on 2020, but when as work on 2021 taxes using TurboTax online, it seems like it's based on 2021.  Another complication is that I became legally separated in January 2021 and divorced in October 2021.  I am filing as Head of Household and claiming one dependent.

[KrisD15]

2021

The payment was ISSUED based on 2020.

The credit is based on 2021. 

So in other words, the payments were issued in 2021. Since no one filed for 2021 yet (the year was not over) the IRS used 2020 income to send out payments. 

The payments are for people within the limits for 2021 income, which why there is the Recovery Rebate Credit. 

If you did NOT get a payment because your income was too high in 2020, but you are eligible with your 2021 income, you will get the "missing" payment as a credit. 

If you did NOT get a payment because your income was too high in 2020, and it is still too high in 2021, you won't get a credit. 

[Gloria16]

I just e-filed my tax returns on April 9, 2022, and I owe federal and state. I noticed when I printed my return, that on top of what I owe I am being charged for penalty/interest. How can this be if I filed before the dateline? 

Thanks in advance for your help.

[LenaH]

It depends.

Generally, you'll have to pay an underpayment penalty for 2021 on your federal taxes if you owe more than $1,000 in taxes (after taking withholding into account) and:

 * Your taxes withheld don't cover at least 90% of your 2021 tax liability, or

 * Your taxes withheld aren't at least 100% of your 2020 tax liability if your AGI is up to $150,000 or 110% if your AGI is more than $150,000. (The amount is $75,000 if you're married filing separately.)

Underpayment penalties are also assessed if you don't withhold or pay enough tax on income received during each quarter. In fact, it's entirely possible to get hit with an underpayment penalty even though you paid your tax bill in full by the April deadline or are getting a refund.

Your state guidelines for assessing a penalty are most likely different. If you tell us your resident state, we can provide further information for why you may have been assessed a penalty. 

@Gloria16