Recovery Rebate Credit

[helper21]

I'm helping people with two situations.  TurboTax is giving recovery rebate, possibly in error.    Case 1:  Person died in March 2020 and did not receive either payment.  Case 2:  Person made too much money to qualify based on 2019 income so did not receive payments, but 2020 income is lower.   It seems that neither case should get the tax credit, but TurboTax keeps granting it.  Is TurboTax wrong?  Thanks!

[bluedeb · Accepted solution]

TurboTax is not wrong.  

Eligibility for getting the payments mailed in 2020 was based, in most cases, on your 2019 or 2018 tax filings. 3 If you did not receive your payment or the full amount due, for example, because the income on your taxes was too high and your lower income in 2020 would have qualified you--or because of a change in number of dependents in 2020 compared to 2019--you can claim the amount due as a refundable tax credit on your 2020 Form 1040 or 1040-SR filed in 2021. Both Form 1040 and Form 1040-SR will include a line for "Recovery Rebate Credit."

Once eligible, you may qualify for a full or partial Recovery Rebate Credit on your 2020 return if any of the following apply:

• You were eligible for payment but did not receive one.
• You did not receive the full amount to which you were entitled.
• Your 2020 income makes you eligible for a rebate (or larger rebate) now.
• You had a child in 2020 after you received your stimulus payment.

[Onecrazyfool73]

my federal return came back as incorrect because of the recovery rebate credit. i remember being asked about the stimulus payments in the return and replied yes to getting both last year, but somewhere down the line i must've answered something wrong thereafter. Not sure. I don't remember. But i do understand not to receive extra stimulus money that i already got. i always try to answer questions as accurate as i can. Anyways Turbo Tax had an extra $600 added to my return when not supposed to. 

[JoannaB2]

Yes, if your 2020 federal income tax return came back because of the Recovery Rebate Credit incorrectly entered, you may fix it and re-transmit your income tax return.  You must enter the correct amount on EIP1 or 1st stimulus received and EIP2 (2ND stimulus) received on the Recovery Rebate Credit form.

[crumbsteve]

In my case, I think TT was incorrect.  My return was kicked back with an indication of an amount due because I did not qualify for the Recovery Rebate Credit (which was included on my 1040).  My adjusted income was clearly above the level and TT should have caught that when it ran a check prior to submission.

I did not receive payments nor did I claim my dependent who did.  Seems like a bug to me.

[Critter-3]

This section of the program has caused many data input issues especially if you filed early  and is 100% dependent on your answers on which the credit is calculated on ...  the IRS is checking everyone who has an amount on line 30 of the form 1040 against their records.  And this is nothing the program can "check" before filing since they have no access to your info on the IRS website like you do.  

https://www.irs.gov/payments/view-your-tax-account

[UserSteve]

I had the same issue.  Turbo Tax added a recovery rebate credit when it should not have.  My refund was delayed 3 months before the IRS adjusted it out.  I have a screenshot  showing TurboTax saying I get a credit and a help menu next to it saying I don't qualify.  Not sure how to get that screenshot to TurboTax though.

[VolvoGirl]

You can attach it to a post using the camera icon at the top of the reply box.   Be sure to redact/cover any personal info.

[rederick]

@UserSteve  Wondering if TT has issued any refund due to error of adding a recovery rebate credit when shouldn't have. This also happened to me however I don't have the screenshots like you do. Thanks for your insight

[UserSteve]

Intuit has done nothing at all

[Proto2348]

TurboTax 2020 IS WRONG, in my case. 

The IRS just hit me with penalties and interest.  I am VERY ANGRY.

TT2020 claimed that I was owed a Recovery Rebate Credit, even though I was not (my income is too high), and even though TT2020 calculated my AGI.  TT2020 put this credit on my 2020 Form 1040.  The IRS sent me a letter a few weeks ago, informing me that I owed additional taxes, penalties and interest.  I went back and looked at the 2020 Form 1040 TT2020 generated, and sure enough, there it was listed on line 30.  The IRS letter said this was incorrect.  The IRS is correct in this case. My AGI is higher than the max you have to get the recovery rebate.

[KrisD15]

To clarify, what was your AGI on your 2020 tax return? 

Did the IRS adjust your AGI?

According to the IRS:

Generally, if you were a U.S. citizen or U.S. resident alien in 2020, were not a dependent of another taxpayer and have a Social Security number that is valid for employment, you are eligible for the Recovery Rebate Credit. Your credit amount will be reduced by the amount of your first and second Economic Impact Payments. 

It also is reduced if your adjusted gross income (AGI) is more than: 

• $150,000 if married and filing a joint return or filing as a qualifying widow or widower

 • $112,500 if filing as head of household or 

• $75,000 if filing as a single or as married filing separately.

 Your payment will be reduced by 5% of the amount by which your AGI exceeds the applicable threshold above. You are not eligible for the Recovery Rebate Credit claimed on a 2020 tax return if any of the following applies: • You may be claimed as a dependent on another taxpayer's 2020 return (for example, a child or student who may be claimed on a parent's return or a dependent parent who may be claimed on an adult child's return). • You do not have a Social Security number that is valid for employment issued before the due date of your 2020 tax return (including extensions). Some exceptions apply for those who file married filing jointly where only one spouse must have a valid Social Security number to claim the credit. • You are a nonresident alien. • You are an estate or trust.

[VolvoGirl]

What is your AGI on 2020 on Turbo tax?   Sounds like the IRS increased your income which made it to high the get the Recovery Rebate Credit.   Did you have any 1099R forms?   You might have got the wrong taxable amount on 4b or 5b.   Or left off some income.  

[Proto2348]

No the IRS did not adjust my AGI.  They simply stated that I made a mistake in claiming the Recovery Rebate Credit, so I owed more tax, and now a penalty + interest.

[Proto2348]

Our AGI (as filed with TurboTax when I originally filed) was over $150,000.  TT knew what my AGI was at the time, because it calculated it and it was well above the $150,000 threshold for married, filing jointly (which we are).

In the letter I received one month ago from the IRS about this error, they showed their AGI calculations for us, and they showed my AGI calculations (TurboTax).  The NUMBERS WERE THE SAME.  They did NOT adjust our AGI. 

Basically, it boils down to the fact that our AGI greatly exceeded the $150,000 threshold, and we should NOT have taken that Credit.  But, I didn't know this, and TurboTax asked me how much stimulus payments we received and when, which I gave it the correct and accurate answers (it was almost none).  Yet, TurboTax mistakenly assumed I should get this credit, even though we all know the max threshold is $150K.  I did not know this at the time I filed.  I only know this NOW that I have been penalized by the IRS and started researching it, almost a year later.

TT made the error, but I had to pay the price.  For the 2021 tax year, I will try to correct this mistake manually.