Recovery Rebate Credit

[haused]

I'm wondering why Turbo Tax didn't find my error in reporting the Recovery Rebate Credit. I've had confidence that turbo tax would prompt me to accurately file my taxes, but because of this I went from a decent refund to owing almost $3000!

[xmasbaby0]

How do you think TurboTax would know if you received the 3rd EIP payment?   The software makes its calculations based on the answers you give to the questions.   You were asked if you received the 3rd stimulus check.  If you said no, then the software calculated the recovery rebate credit for you and added it to your refund.   If that was incorrect, the IRS cross checked and removed the recovery rebate credit and reduced your refund to the amount you are actually entitled to receive.

[rjs]

I assume that your error was that you said you did not receive the stimulus payment, although you actually did receive it, or you did not enter the correct amount that you actually received. (If you filed a joint tax return, "you" means you and your spouse combined.) TurboTax has no way of knowing what stimulus payments you received, or how much you received. That's why it asks you. It has to rely on you to enter the information accurately. Your entries are TurboTax's only source of information, and it has to assume that you enter it correctly. TurboTax does not have access to the IRS records of payments that were sent to you. It has no way of knowing if your entries are not accurate.

[haused]

I have to say I don't appreciate your snarky answer. I used Turbo Tax, rather than a tax professional, because I had confidence they would catch all possible eventualities (like I answered no - I didn't receive a 3rd payment, but then it should have been flagged that I didn't receive it because of our combined income). 

[rjs]

The stimulus payments were based on your 2020 tax return (or 2019 in some cases). The income on your 2021 tax return does not provide any clue as to what, if any, stimulus payments you received.

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@haused wrote:

I answered no - I didn't receive a 3rd payment, but then it should have been flagged that I didn't receive it because of our combined income.

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I don't understand your statement. If you answered No, that you didn't receive a third stimulus payment, and you actually didn't receive it because of your income, then your answer was correct, there was no error to catch, and your tax return would have been correct.

[xmasbaby0]

The IRS sent out letter 6475 to people who received the 3rd stimulus check.   If you filed a joint return, the IRS sent letter 6475 to each spouse.   When you went through the Federal Review section you were asked if you had received the $1400 per person stimulus.   The way you answered that question determined whether the recovery rebate credit was put on line 30 of your Form 1040.   If you are not sure whether you received the $1400 per person stimulus checks, go over your bank records starting with mid-March of 2021; or check the IRS online account for each spouse to see what the IRS says you received.  If your income was above the limit you could have received a phased out amount, but the amount you received was still supposed to be entered when you answered the questions.

https://www.irs.gov/payments/your-online-account

https://www.irs.gov/newsroom/questions-and-answers-about-the-third-round-economic-impact-payment-top...

If you need to trace a payment that the IRS says has been issued to you, mail or fax a completed IRS Form 3911, Taxpayer Statement Regarding Refund.

Updated IRS FAQ about recovery rebate credit

https://www.irs.gov/pub/taxpros/fs-2022-27.pdf

[Critter-3]

Ok ... if you did not get the advance  the program gave you the credit correctly.  The fact that the IRS disagrees is not your fault or the program's fault.

If you never received a stimulus deposit or check—and the IRS says they paid you—then you should ask the IRS to trace your payment.

The fastest way to initiate a trace is to contact the IRS by calling us at 800-919-9835.

You can also complete Form 3911:

• Write "EIP3" on the top of the form to identify the payment you want to trace.
• Complete the form answering all refund questions as they relate to your Economic Impact Payment.
• When completing item 7 under Section 1:
• Check the box for "Individual" as the Type of return
• Enter "2021" as the Tax Period
• Do not write anything for the Date Filed
• Sign the form. If you file married filing jointly, both spouses must sign the form.

You will generally receive a response 6 weeks after we receive your request for a payment trace, but there may be delays due to limited staffing. 

[NCperson]

@haused - TT is dependent on your response to how much you already received for the 3rd stimulus to determine the Recovery Rebate Credit"

here is the calculation (pretty simple) for Line 30 of Form 1040: $1400 times the number of people listed on your tax return LESS what you received for the 3rd stimulus last year, but not less than zero.

If what you entered into TT as the amount you received last year and that does not match the IRS records, the IRS will reduce Line 30 by a like amount.  That in turn will reduce your refund / increase what you owe

suggestions:

1) look at your bank account statements from last March - May, 2021 and reconfirm what you actually received.

2) if you have Letter 6475, THAT is what you should have entered when prompted by TT.  WARNING: if you filed married -joint, there were TWO letters, once for each spouse, and they HAD TO BE ADDED TOGETHER (#1 error I see on these board  - failure to add in the 2nd letter!) 

does that help?

[haused]

Exactly - which is why I don't understand why after submitting my return the IRS instead changed it and now I owe money.

[Critter-3]

@haused 

Read the notice carefully ... what exactly did the IRS change ?   Did you make an entry error ?  Are they correct ? 

As already pointed out if this has to do with the stimulus credit on line 30 and you are sure you did not get all of the payment you are entitled to then put a trace on the missing payment  and/or contact the IRS by calling the number on the notice.

[rjs]

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@NCperson wrote:

here is the calculation (pretty simple) for Line 30 of Form 1040: $1400 times the number of people listed on your tax return . . .

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@NCperson 

It's not that simple. The OP, haused, indicated earlier that their income might be a factor. For married filing jointly the Recovery Rebate Credit begins to phase out for AGI above $150,000, and is completely phased out for AGI of $160,000 or more. The AGI limits for other filing statuses are lower. There is a worksheet for calculating the credit in the IRS instructions.

[rjs]

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@haused wrote:

Exactly - which is why . . .

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@haused 

Exactly what? We can't tell what you're referring to. There are a lot of posts in this thread, and some of them are quite long.

[NCperson]

@rjs - agreed if there is over $150k of AGI, but I do not see where @haused ever stated that; for most the issue isn't that their income is over $150k, it's they did not report the EXACT amount that they received.....

[Critter-3]

Ignore the laundry list of "possible" errors on the IRS notice.  The only one that applies is the last item... the "math error" which simply means the IRS disagrees with the credit on your return because the user entered the incorrect amount they got in the third stimulus check and/or CTC  advance payments   OR  the IRS disagrees with the amount listed.   The user needs to review the amounts they actually got deposited and if they disagree with the IRS determination  have a trace put on the missing money.  This is a very common issue again this year like last year's reconciliation of the first 2 stimulus payments.  Hopefully congress will not do this again in the future.

[NCperson]

@haused -

<<which is why I don't understand why after submitting my return the IRS instead changed it and now I owe money.>>

the IRS is not agreeing with the amount you state you already received! They think you received more than you entered into Turbo Tax and therefore that reduces Line 30, which reduces the refund / increases what you now owe. 

You were eligible for the stimulus or the Recovery Credit but NOT both! 

They know what they sent you and they assume you received it. 

I have seen situations on these board where the taxpayer truly didn't receive it, despite the IRS records (think lost in the mail situations) .... the only recouse at that point is submitting a trace to the Treasury so they can determine what happened to the money

but the 1st step is to be double sure that the money didn't hit your bank account and you didn't notice (trust me, there are many on these boards who didn't realize they received it!) 

https://www.irs.gov/pub/irs-pdf/f3911.pdf

Please recheck your bank statments for March - May, 2021.... how much did you receive? 

does that help?