After filing my 2021 taxes online with Turbo Tax in February, I finally got information from the IRS. According to their letter I do not qualify for the Recovery Rebate Credit as was entered by the Turbo Tax program. My refund was $1400 less than calculated by Turbo Tax. Not sure why the tax program entered the credit in the fist place. Looking back at the info provided I did not qualify for the credit. Fix your tax program people!
What happens next year if I use Turbo Tax (extremely unlikely now) to do 2022 taxes. They have the higher refund amount listed on my return. That will definitely cause me to pay higher state tax than necessary.
@Iowaoldlady You were supposed to answer the questions in Federal Review about the recovery rebate credit and indicate whether you had received the 3rd EIP payment. If you skipped it or answered incorrectly, it put the $1400 credit on line 30. When the IRS saw it on line 30 and checked their records---they saw that you already got it and took it away since you cannot get it twice.
Even if you were getting the credit---it was not taxable and did not add to the taxable income that your state cares about.
Yes the state of Iowa taxes the refunds we receive from our federal taxes the previous year. It must be added as income because the amount was deducted from income the previous year. If the refund on the return is incorrect TT will add that original filing amount as income to my state return next year. I did answer the questions about the three payments I received. I did not ignore filling that in. If I had not filled the information the program would have flagged it when I ran the review and check before I e-filed.