TurboTax thinks I deserve the Recovery Rebate Credit -- I don't

[wb9nme]

I had an unusual tax situation in 2019.  (I sold $80,000 worth of stock and paid capital gains taxes on it)  For tax year 2019 only, I didn't use TurboTax because I didn't trust my calculation of the cost basis of the stock.  

As a result of that stock sale, my 2019 AGI was a bit more than $100,000.  By everything I've read, I wasn't eligible for any stimulus payments in calendar year 2020.  (and in fact, I didn't receive any)

My income was back to normal in 2020, about $62,000.   Since I didn't have any stock sales to worry about, I went back to TurboTax.   It's telling me I should get a Recovery Rebate Credit of $1,800.  (I expect I *will* receive stimulus payment(s) this year once my 1040 is filed)

If my 2019 AGI was more than $99,000, aren't I ineligible for the Recovery Rebate Credit on my 2020 taxes?  If I'm right about that, how do I tell TurboTax not to claim it?  

Thanks!

[VolvoGirl · Accepted solution]

No.  It's really based on your 2020 return so you qualify to get it now.

[wb9nme]

Thanks! -- somehow that was seeming counter-intuitive but since you seemed so certain:), I took another spin through the IRS website & sure enough, it is based on 2020 & I do get that credit.

Guess that's why I'm an electronic technician & not a tax accountant:)

Thanks a ton!

[NCperson]

it's a little convolved in the way it was explained by the IRS and Congress, but that is why the original payments were called 'stimulus' and on the 2020 tax return it's called a 'Recovery Credit'

The stimulus payments were an ESTIMATE of what you would be due when you filed your 2020 tax return. Obviously, the IRS didn't have anyone's 2020 tax return when the 1st two stimulus payments occurred so they used 2019 tax returns as the basis of the ESTIMATE.

But what you are ACTUALLY due is based on your 2020 tax return.

if the ACTUAL is greater than the ESTIMATE (your case), then that difference will appear on Line 30.

if the ESTIMTE is greater than the ACTUAL, then Line 30 will be zero and by law the difference does not have to be paid back.  Line 30 cannot be negative. 

So anyone whose income was high in 2019 and didn't get the stimulus, but their 2020 income was low will get the Recovery Credit.  Similarly, anyone who got the stimulus because their 2019 income was low, even thought their 2020 income is high, won't be asked to return anything.

this is one of the few cases where Head you win and Tails you win when the IRS is involved!