Is there an error in the "Recovery rebate credit worksheet"?

[dublinman2370]

While working on my 2020 taxes, when I reached the Federal review, it added $1662 to my refund. 

After a little digging in the FORMS section it showed a "Recovery rebate credit worksheet". I never received any Stimulus payments in 2020 because the rebates were based on my 2019 earnings which my AGI was $150,000.

   On line 11 of this form it says "Enter the amount from line 11 on form 1040 or 1040-SR". Turbo tax entered the amount from my 2020 (current return) which was about half of my 2019 return. 

   I believe the worksheet is in error because everything I have read on the rebates, (including on the IRS website) says the income limits are based on your 2019 AGI, NOT your 2020 income.

Has anyone else received this boost in your refund that knows they are not eligible for the stimulus ?

   I would love to take this money but do not look forward to the IRS letters saying that I owe them or have committed fraud to the US Government and face penalties.

[LenaH · Accepted solution]

The Recovery Rebate Credit is calculated based on your 2020 income, whereas the stimulus payments were based your 2019 tax return or last return filed. If a taxpayers' situation changes in 2020, they could get a partial or the full stimulus payments based on their 2020 income. 

Per the IRS, your Recovery Rebate Credit amount will be phased out if your adjusted gross income for 2020 exceeds $75,000 if you filing single. The credit phases out at a rate of 5% for your adjusted gross income over $75,000. 

Since you stated you are making around half of what you made in 2019, you now qualify for the the stimulus payments filing single with no dependents, with a slight phase out for making above $75,000. The credit is correct on your tax return. 

For additional information, please see the IRS website for the Recovery Rebate Credit. 

[dublinman2370]

After reading this link, there are two different types of rebates, one based on 2019 AGI AND one based on 2020's.

Here's an excerpt from an IRS Recovery Rebate Worksheet as shown in the IRS Form 1040 instructions on page 59

Economic Impact Payments were based on your 2018 or 2019 tax year information. The Recovery Rebate Credit is similar except that the eligibility and the amount are based on 2020 information you include on your 2020 tax return.

You will need to know the amount of any Economic Impact Payments issued to you to claim the Recovery Rebate Credit. If you’re eligible for the Recovery Rebate Credit on your 2020 tax return, it will be reduced by any Economic Impact Payments we issued to you. Always be complete and accurate when you file a return.

I stand corrected. Now I wonder why I never received any of the Stimulus moneys.

[KrisD15]

The payments were always to be based on 2020 income. They were issued in 2020 based on 2019, with the understanding that if the person did not get the payment based on the 2019 income, they would get it on their 2020 tax return if eligible. 

It was also determined that although the payment would be based on 2020, if -when the payment was finally calculated on the 2020 income- that 2020 income made them now ineligible, the payment received in 2020 needn't be repaid. 

SO, people that didn't get one, have a second chance to get it now, and people that did get one, but shouldn't have based on the 2020 return, do not have to pay it back. 

[chaddlee]

I just dont understand why I was "told' by TurboTax that I would get a refund of $600 as per the Recovery Rebate, which THEY figured the amount, as I filled out the information as asked correctly.  IRS says I get 0 refund now.  I cant figure out how or why TT filled it out automatically for a refund which surprised me as I answered all questions honestly as they popped up.

An error in their software perhaps?  Lots of complaints I am reading about this issue.
Dan

[DMarkM1]

Since the IRS changed your refund you will get a letter from them explaining the changes.  The letter will have instructions on your options.  Here is the latest on what to expect in your letter.  

[Beetowa]

My Recovery Rebate Credit was also reduced to $0 and I definitely should qualify for it. I moved after receiving the first stimulus check and never received the second. I live overseas and I'm hoping the notification letter from the IRS doesn't take too long to get here.

[ronmac7609]

Turbo Tax applied a $1,286 Recovery Rebate Credit on my 1040 and now the IRS sent me a letter stating I owe this money back!  They computed this with their software.  

[LinaJ2020]

It depends if you entered the info correctly in the program.  Did the IRS show you the calculations or breakdown?  You can compare it with your worksheet. 

In the TurboTax Online program,  

• After sign in to your account, select Pick up where you left off
• At the right upper corner, under Search, type in "stimulus" and Enter
• Select Jump to stimulus
• Follow prompts to answer the questions and enter the amounts.

To learn more, click here:  Recovery Rebate Credit

@ronmac7609

[AZCams Member 1989]

I also just received the letter from the IRS indicating my Recovery Rebate Credit information is incorrect. Basically stating that I don't have a recovery credit as shown on line 30 of the 1040.  That being said, I think I may have found out why MY information is wrong. 

Using TT Recovery Credit Worksheet,

• Line 5 ask that you enter $1,200 or $2,400.  For the purpose of this exercise I entered $2,400 ($1,200x2)
• Line 19 ask that you enter the amount, if any, of EIP.  This amount was $1,200 ($600x2)
• Line 21 adds lines 17 and 20 which total is $1,200. Which is the difference between line 15 ($2,400), and line 16 ($1,200).

From a formula perspective I understand the math that took place here.  But from a logic perspective why is LINE 5 being asked.  In reality, Line 21 should be ZERO ($0), thus moving $0 to Line 30 on the 1040.

[sbhansen86]

This happened to us as well! 

Who is now going to pay for this? Turbo Tax is suppose to pay for any mistakes they make correct?

[LenaH]

As you were going through your return, you should have gotten to a screen in which you were required you to enter the stimulus payments you received. If this was skipped over or not entered correctly, the credit would have been incorrect. The credit is calculated based on the information entered. This is not considered a mathematical error in the program. 

@sbhansen86

[VolvoGirl]

Sorry if you do not qualify for the Recovery Rebate Credit because of your 2020 tax situation then you will not be able to get the missed stimulus payment.

See IRS Topic B: Eligibility top 3 questions

https://www.irs.gov/newsroom/recovery-rebate-credit-topic-b-eligibility

The Recovery rebate credit is really based on your 2020 AGI, not 2019 or 2018.  See my posts on this one.  I found a couple IRS links that say if you don't qualify  for more based on 2020 and you don't have to pay it back if you got too much.

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/recovery-rebate-tax-credit/00/17...

And see the employee expert answer here

https://ttlc.intuit.com/community/taxes/discussion/recovery-rebate-credit-stimulus-incorrect/00/1942...

She said......

If you do not qualify for the Recovery Rebate Credit because of your 2020 tax situation then you will not be able to get the missed stimulus payment.

[thegeorges92028]

Thanks for the info and you are correct in that the Recovery Rebate Credit is based on 2020 income even though the 2nd stimulus check was based on 2019 income. 

Too bad the TT and IRS customer service people couldn't answer this today and point me to the info in the IRS instructions. Between the two I spent over 4 hours on the phone trying to get this resolved.

But I guess it figures...the IRS is MUCH better at taking our money than fairly giving it back. They made a mistake by not sending us the second stimulus when we were qualified and should have received it and then changed the rules after the fact so we can't get it.  

[jennyebean]

Hi Lena- I accurately entered all of the info when I did my 2020 taxes, we had only gotten 1 payment of $1450.00, so TT calculated that our RecoveryRebateCredit was $4350.00

Side note - We've still not gotten a 2nd or 3rd payment, but the IRS has now sent us a letter saying that we owe back $1450.00 towards our 2020 tax return because the RRC wasn't calculated accurately.

I see you keep mentioning that it should calculate right if the info entered is right, and it was FOR SURE accurate on my end, as far as I accurately entered what we received. But it didn't calculate right on TT's end and thus on my 1040 return. 

So now what???