I was under the impression that the $1200 and $600 stimulus checks were not taxable for 2020 and would not have any effect on refund amounts due. When I reply to "Let's Double-Check the Amount You Received" screen with "Yes" agreeing to the $1200 and $600 amounts, it reduces the amount of refund by a sizable amount. It was my impression that these amounts would be offset by an entry on line 30 of the return. Am I confused?
You might have become confused by the flow of information in the software. That "refund monitor" on your screen displays a "refund" amount that includes the stimulus money. as part of your 2020 refund. The software starts off by giving you the stimulus money. But later when you enter the amount of stimulus you really received already, it removes the stimulus already given to you. And it looks to you like you "lost" your refund, But ---you do not get the same stimulus money twice--that is why it came out.
Look on line 30 of your Form 1040 for your recovery rebate amount.
Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.
Yes, the stimulus payments are not included in your taxable income.
But before you entered the stimulus payments received the refund included the amount of Recovery Rebate Credits as if you didn't receive any stimulus payments. Once you entered the stimulus payments it calculated the correct Recovery Rebate Credit amount and showed the correct refund amount.
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