My mother died in April of 2020 and received a stimulus check which we had to return. The tax program is trying to give her a stimulus credit How do I remove the credit?

[Opus 17]

She is entitled to the rebate on her 2020 tax return.  See question B12 here.  https://www.irs.gov/newsroom/recovery-rebate-credit-topic-b-eligibility

I never understood why the IRS insisted on returning the payment, since the way the law was written, taxpayers who died during 2020 were always going to be eligible.

[NCperson]

you are in luck.... the IRS changed it's thinking on the stimulus in your situation. Yes, they originally said that if the person died before receiving the 1st stimulus, you had to send it back.  But now they changed their minds.  See this link from the IRS website

So it is correct that your mother's tax return, Line 30, is showing that her estate is owed the 1st stimulus (and for that matter the 2nd as well if it was not received).

As noted below only those who died prior to 1/1/20 and received the first stimulus are required to return it

Q A5. Did the IRS send payments to deceased individuals? (updated March 9, 2021)

A5. If a first payment was made to someone who died prior to January 1, 2020,  it should be returned to the IRS by following the instructions in Topic I: Returning the Economic Impact Payment.

Joint filers with a deceased spouse: For payments made to joint filers with a deceased spouse who died before January 1, 2020, return the decedent’s portion of the payment. This amount will be $1,200 unless your adjusted gross income exceeded $150,000.

If you can’t cash or deposit the check: If you cannot cash or deposit the payment because it was issued to you and a deceased spouse, return the check as described in Topic I: Returning the Economic Impact Payment. After the IRS receives and processes your returned payment, your first  Economic Impact Payment will be reversed to you and you can claim the Recovery Rebate Credit on your 2020 tax return, Form 1040 or Form 1040-SR.

• The IRS is aware that some surviving spouses weren’t issued their portion of the payment. Eligible individuals who didn’t receive a payment may be eligible to claim the ​​​​​Recovery Rebate Credit when they file their 2020 tax return.

The Bureau of the Fiscal Services (BFS) has cancelled outstanding Economic Impact Payment (EIP) checks issued to recipients who may not be eligible, including those who may be deceased. Recipients should still return these checks as described in Topic I: Returning the Economic Impact Payment instructions.  

Update: With regard to eligible individuals who died in 2020, the Recovery Rebate Credit may be claimed on line 30 of their 2020 tax return if the first Economic Impact Payments were not issued.  Please refer to the Instructions for Form 1040 and Form 1040-SR for more information.

[NCperson]

@Opus 17 - as I recall when the first stimulus law was passed, the law wasn't clear what happened if someone died before the money was received.  At that time, the IRS took the position that the money was to be returned.

I think it created such a furor that when the 2nd stimulus bill was passed, Congress made sure the law was very clear: anyone who was alive after 12/31/19 and otherwise met the eligibility requirements for stimulus was entitled to it.  (for EIP 3, if you are alive after 12/31/20, your estate gets it, subject to meeting all the other eligibility requirement)

For whatever reason, the IRS recently clarified Stimulus 1 so it works like Stimulus 2 with respect to deceased. 

[Opus 17]

I beg to differ.

Nothing in the CARES act says the credits can't be paid to individuals who were deceased in 2020.  The law says the credit is for "any eligible individual" who files a 2020 tax return and "an eligible individual is any individual" except a dependent, alien or estate or trust.

The budget reconciliation that funded EIP2 only changed it to make it exempt from all offsets including child support (EIP1 was exempt from offsets except child support).

The repayment requirement was always going to be reversed on the tax return.