In 2021 we filed a joint return and claimed an adult dependent. Also, in 2021 my husband and I received a $2100 Economic Impact Payment, and our adult dependent received $1400.
According to TurboTax's Recovery Rebate Credit Worksheet, my husband and I were entitled to a $2800 Recovery Rebate Credit. Having a dependent raised the Recovery Rebate Credit threshold to $4200.
We subtracted $2100 from the $4200 total and claimed the remainder, $2100 ($4200 less $2100) as a Recovery Rebate Credit (Line 30, Form 1040-SR).
We received a letter from the IRS disallowing the $2100 credit. We are confused as to how to proceed and have several questions:
1) Are we entitled to the $4200 Recovery Rebate Credit? (2 times $1400, plus $1400 for dependent).
2) Should we have shown $3500 in Economic Impact Payments as opposed to $2100? In other words, should we have added the $1400 received by our dependent to our $2100?
3) If the answer to the above (#3) is yes, should we have claimed $700 ($4200 less $3500) on Line 30, Form 1040-SR?
4) Once we find out the correct answer to the above question(s), what should our recourse be as far as responding to the IRS?
Thank you in advance for all your responses.
