I ran into an issue filing my taxes with TurboTax today that millions of people are certain to encounter this tax season. What's worse is no one seems sure what the correct answer is.
My girlfriend and I coparent our son and each take turns claiming him as a dependent. She claimed him last year and this year is my turn. When filing on Turbotax you are asked how much you received for the first and second stimulus and I entered the amount I received, 1200 and 600 respectively. Turbotax then said I should have received more in stimulus because I have a dependent, and that I was eligible for the Recovery Rebate Credit. In my case the credit was $1,100 and my refund increased $1,100. But my son has already received his stimulus. Since his mother claimed him on her 2019 tax return she received his portion of the first and second stimulus payments. There is no option to select that your dependent has already received their stimulus. It does NOT ask you to enter the amount of stimulus you received for both yourself and you dependents, it says how much did you receive in Stimulus and you enter in an amount into 2 different boxes.
Turbotax agents say they have never seen this issue before and ultimately advised I file with the expectation the IRS will approve my return and adjust the refund amount to not include the $1,100 credit. After looking over my 1040 and seeing like 30 Recovery rebate credit says $1,100 I'm convinced they are wrong and that TurboTax did not properly configure their software for situations like mine where the dependant was claimed by the other parent in 2020
There is nothing wrong with the program and this is perfectly legal. Whether Congress was sloppy or intentional, you are entitled to the money.
The law always created the stimulus as a credit on your 2020 tax return. The law also specify that in order to make early payments and not require taxpayers to wait, the IRS should use prior year information whenever possible. This creates a situation for many people who share custody and alternate years claiming their dependent, where a stimulus credit may have been paid to one parent, and is now being awarded to the other parent. If you feel guilty about it, I’ll send you my Venmo ID and you can send me the money 🙂 (just kidding)
If you claim your child this year, you will get the credit correctly. If your girlfriend does not claim the child, and was awarded a payment based on last year‘s return, she will not have to repay the excess.
Unfortunate that TurboTax support cannot give the correct answer.