Turbo Tax mistake on the Recovery Rebate Credit Worksheet

[bcarlson]

I just received a mailed notice from the IRS telling me I owed $378.32 for 2020 1040SR.

I quickly spotted the problem.  Turbo Tax calculated a $375 credit on its Recovery Rebate Credit Worksheet.

The problem with that, is my AGI, on line 11 was $178,495.  Since it is more than $150,000 (for married filing jointly), I should not have been able to realize any credit at all.

I'm surprised and disappointed that the 2020 Turbo Tax had no limit formula built into its worksheet.  I only learned of this $150,000 ceiling from the IRS letter I just received.

So clearly I owe the IRS for the $375 credit, which I was not allowed to take.  However, due to Turbo Tax error, I'm also forced to pay $16.00 for "Failure to pay proper estimated tax penalty" and $3.32 for interest.

I would expect Turbo Tax to credit me $19.92 on my next purchase, but I'm not going to expend any more effort in getting it.  I've used Turbo Tax since it was first "born" and have used it ever since.  I'm also a long term investor in Intuit.  I would recommend it to anyone, and this is the very first (and hopefully only) formula error I have encountered.   I hope this message will serve as an alert to examine the formulas on that worksheet.  Keep up the good work.

Bud Carlson, CPA

St. Louis, MO

[Mike9241 · Accepted solution]

https://www.irs.gov/newsroom/questions-and-answers-about-the-first-economic-impact-payment-topic-c-c... 

However, for higher income individuals, the first and second payment amounts were reduced by 5% of the amount that their adjusted gross income (AGI) exceeds:

$150,000 for taxpayers filing a joint return

so in theory you should have gotten

line 7 $2,400 of the worksheet (assuming no kids) 

line 11 $178,495 your AGI.

line 13 of the worksheet should have been checked yes

line 14  ($178,495- $150,000 = $28,495 x 5%  = $1425

line 15 - line 7 less line 14 = $975

line 16 actual EIP 1 that you got. this you entered - maybe this is where the error occurred (you may have entered $600 when according to the IRS records you actually got more than $975. this is how you would have gotten an excess credit of $375 that the IRS wants back. of course, the IRS could be in error of the amount you received)

line 17 line 16 less line 15 but not less than $0

if line 16 is more than line 15 you don't have to pay it back

line 10 $1,200

line 18 line 10 less line 14 but not less than $0 = 0

line 19 actual EIP 2 you got

line 20 line 18 less line 19 but not less than $0 = 0

if line 19 is more than line 18 you don't have to pay it back.

[bcarlson]

Thank you Mike for providing the line by line analysis:

The bottom line conclusion is that Turbo Tax is not at fault. It does not have incorrect calculations on the Recovery Rebate Credit Worksheet. I entered an incorrect number on the form (on line 16).
You don't have to spend time reading my step by step analysis below. Thanks again very much for your help.

Following this with my actual situation in red (mainly the additional dependent under 17):

line 7 $2,400 of the worksheet (assuming no kids)  $2,900

line 11 $178,495 your AGI.

line 13 of the worksheet should have been checked yes

line 14 ($178,495- $150,000 = $28,495 x 5% = $1425

line 15 - line 7 less line 14 = $975  $1,475

line 16 actual EIP 1 that you got. this you entered - maybe this is where the error occurred (you may have entered $600 when according to the IRS records you actually got more than $975. this is how you would have gotten an excess credit of $375 that the IRS wants back. of course, the IRS could be in error of the amount you received)  I manually posted $2,900.  Not sure where I got that number.  I just checked with IRS.gov/account and apparently I received $1,450 for EIP 1 and $622.75 for EIP 2 for a total of $2,072.75. 

line 17 line 16 less line 15 but not less than $0  So, with $1,475 in 15 and $1,450 in 16, line 17 is $25

if line 16 is more than line 15 you don't have to pay it back .  No, it's not, so I have a credit for $25

line 10 $1,200  Actually line 10 is $1,800

line 18 line 10 less line 14 but not less than $0 = 0   Line 10 minus Line 14 is $375

line 19 actual EIP 2 you got  which was $622.75

line 20 line 18 less line 19 but not less than $0 = 0   Line 18 minus Line 19 is negative

if line 19 is more than line 18 you don't have to pay it back.

So, line 17 is $25 and line 20 is $0, therefore the total credit I can use is $25, as opposed to the $375 credit I claimed on my return.  Instead of amending my return, I'll simply pay them the total $378.32 per their notice!