Why tax increased when I entered stimulus payment on Federal Review

[steveftse]

On my tax return 2020 I'm preparing I am filing MFJ.  I have 2 children.  1 born in 2019 and another just this past year in 2020.  I received a  the 1st stimulus check  for 2900 around April 2020 and the 3rd stimulus check 4200 around March 2021.  My AGI for 2018 and 2019 was below 150,000 which means I should be eligible for the full economic stimulus for each check sent.  My AGI increased to 180,000 in 2020 but my understanding is this should not impact the amount I did not get the 2nd stimulus check.  My understanding is the stimulus checks are actually advance payment of credit for 2020 year, so if you didn't get a stimulus payment or only got partials you get the refundable credit when you file your tax return if you are eligible.   my understanding is I should be getting an economic recovery rebate credit given I didn't get a 2nd stimulus check and I was eligible for the full amount.  Also, I should get addition for my 2nd child was born in 2020  not accounted for in the advancement credit.

It looks like turbo tax is basing my elibility off my 2020 AGI which is 180,000.  Why is this happening.

What I don't understand is after entering this information into Turbo Tax is why my taxable income and tax went up from a refund of 133 to tax due of 1794?  Please help me understand 

• April 2020: $1,200 stimulus checks, with $500 for each eligible dependent, were sent out as a part of the 
• Jan 2021: $600 stimulus checks, with $600 for each eligible dependent, were sent out as a part of the 
• March 2021: $1400 stimulus checks, with $1400 for each eligible dependent, were sent out as a part of the 

As you start to prepare your taxes this year, you ma

[VolvoGirl]

First of all the Recovery Rebate Credit is really based on your 2020 AGI.  The first 2 were sent out fast using your 2018 or 2019 info but were advances on your 2020 return.   If you do not qualify for the Recovery Rebate Credit because of your 2020 tax situation then you will not be able to get the missed stimulus payment.  But you should qualify for some since 180,000 is less than the full phase out.  Seems odd you didn't get the second one.  Are you sure?  It may have gone to an account you don't remember or they send a debit card.   . It was probably easy to miss the debit card in the mail and think it was junk mail. They have to put a trace on it. The second one should have come between Dec and March 2021.  Did you get any of the letters saying how much they sent you?  

Turbo Tax starts out by giving you the first 2 stimulus amounts and assuming you didn't get them.  So your refund is artificially too high.  Then you enter what you actually got so the starting refund was reduced or the tax due increased. Otherwise you would be getting the Stimulus amount again on your tax return.

Check your 1040 line 30.  Did you get get any more?  

The new 3rd Stimulus for 1400 each person is not part of your 2020 tax return.  You don't enter that one.  Looks like you got it in March for 1400x3=4200.  

[VolvoGirl]

Since your 2020 AGI is 180,000 it looks like the most you qualify for (for the first 2 payments) would be $900.  You got more than that so you won't qualify for anymore on your 2020 return.  But the good news is you don't have to pay any back since you got too much.   You will reconcile the new 3rd one for 1400 on your 2021 return next year.  

[steveftse1]

VolvoGirl,

I disagree.  I am paying back the part of the stimulus I got.  If I'm understanding correctly the stimulus is really an advance refund credit for 2020.  The stimulus 1st and 2nd are estimate advance refunds based on 2019 or 2018 tax return information.  IRS is assuming your income will not increase for 2020.  It looks like my tax return I prepared is correct assuming I did not get a second stimulus check.  Most of my first stimulus is phased out since my income is significantly higher.  I agree with you my credit is roughly $900 if I had 1 child but I am paying back almost $2,000 on my tax return as I owe taxes to the IRS if I had one child.  What I don't understand is why isn't turbotax factoring in 2 children.  My second child was born in Aug 2020.  Is this because is birthday was after the payment of the stimulus payments?  Is the IRS this accurate in counting your household?

The 3rd stimulus is based on 2021.  So I will assume will reconcile account for a family of four $5,600 instead of three.  I will get additional 1400 on my return assuming I get the full amount $1400x 4.  

[VolvoGirl]

I didn't follow that.  But if you owe the IRS it's not because of the Stimulus payments you got or didn't get.   Did your new baby show up on your return and was checked for the Child Tax Credit?  See the screen shot on this post.  Which box is checked?

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-missing-money-from-recovery-r... 

Did you add your baby under My Info? Be sure when it asks how long your child lived with you that you pick THE WHOLE YEAR (which is acceptable for newborns) and not just the number of months. Go back and double check that.  

[steveftse1]

Box 4 Child tax credit is check for both my children but blank for Credit for other dependents. 

Children were not adopted.  I got a 4,000 Child Tax Credit and 1,200 for Credit for Dependent Care.

If I go under turbotax 2020 federal review and put in 1st stimulus $2,900 (1200 husband +1200 wife + 500 child) my tax owed jumps from a refund of (133) to tax due 1,794.    Tax due jumps to 2,721 assuming I got a 2nd stimulus payment of 1,800.

Correct me if I'm wrong.  It looks like I am paying back most of the excess stimulus check because it was assumed my AGI would be 130K and not actually 180K.  Also, 2nd child is not considered.  Should I not be getting an addition credit of $500 on 1st and $600 on 2nd stimulus.

  I am confused.

[VolvoGirl]

Sorry, but as I said above the most you can qualify for (for everyone and for both the 1st & 2nd rounds) is only $900 total based on your 2020 AGI.  You got 2900 for the first one.  Which is 2,000 more than you qualify for.  You don't have to pay the 2,000 back.    So you entered 2900 in the first box?  And entered a 0 (zero) in the second box?    If you do not qualify for the Recovery Rebate Credit because of your 2020 tax situation then you will not be able to get the missed stimulus payment for the new baby.  

Look at your return. The Stimulus payments do not show up anywhere as taxable income so you are not being taxed on it. And they are not being subtracted anywhere on your return either.

[steveftse1]

Ok Volvo Girl,

It just occurred to me it might be better if I work this backward.

For 2020.  My total Credit eligible for a family of 4 is Economic Recovery $5,300 (2900 1st+ 2400 2nd) assuming no phase out.  This is what the IRS gives me on my tax return based on filing status and dependents. 

If the phase out for 1st payment is 5% of what is over AGI which is 30,000 (180,000 AGI-$150,000 AGI) Then my phase out amount is $1,500 (30,000 x 5%).  Eligible for only $900 after filing return.

If the phase out for 2st payment is (174,000) Then I do not qualify for any should be no be getting an economic recovery payment so $0. 

My economic refund credit is a total of $900=(900+0)

Am I correct?  I used rounded numbers.

[VolvoGirl]

And I'm not sure how the phase out increases with 2 children.  It says the AGI is increased 10,000 for each child.   Did you see this IRS page?  https://www.irs.gov/newsroom/questions-and-answers-about-the-first-economic-impact-payment-topic-c-c...   Not sure how that is calculated so the 900 max is probably more.  But I can tell you that the baby also qualifies for the first EIP check too even though they were born after.  So the first one would be 2400+500+500=3,400.   So with no phase out it is 3400+2400=$5,800.  

Whatever the phase out calculates out to - Turbo Tax is doing it right.  Just enter the 2900 you got in the first box and 0 in the second box.  Do you get an amount on line 30?   Are you using the Online version?   Download your whole tax return and check over the Recovery Rebate Credit Worksheet to see the calculations.

How to print your return before filing
https://ttlc.intuit.com/community/printing/help/can-i-print-a-copy-of-my-turbotax-online-return-befo...

[VolvoGirl]

@Critter-3   Do you know the formula to increase the calculation to add children?  I can't seem to wrap my head around it to add it to my spreadsheet.  

[steveftse1]

Okay, I didn't know my phase out rate is increase 10K.  I entered 2900 as you guest on stimulus payment 1. I entered 0 on stimulus payment 2.   On line 30 Recovery Rebate Credit I get $927 which seems low to me.  I have turbo tax premium version.   My understanding is the phaseout is 5 cents for every dollar over or 5 dollars every 100 dollars over 150K for each stimulus.  I did not know basis is increased by 10,000 for every child.

If I'm following the regulations correctly and following what you are telling me.

My first EIP should be 3400- [[phone number removed]00-20000)x.05] = 500 phaseout = 2,900

My send EIP should be 2400- [[phone number removed]00-20000?)x.05] = 500 phaseout = 1,900