2021 Recovery Rebate Credit Question

[DP101]

In 2021 we filed a joint return and claimed an adult dependent.  Also, in  2021 my  husband and I received a $2100  Economic Impact Payment, and our adult dependent received $1400.

According to TurboTax's Recovery Rebate Credit Worksheet, my husband and I were entitled to  a  $2800 Recovery Rebate Credit. Having a dependent raised the Recovery Rebate Credit threshold to $4200.

We subtracted $2100 from the $4200 total and claimed the remainder,  $2100 ($4200 less  $2100) as a Recovery Rebate Credit  (Line 30, Form 1040-SR).

We received a letter from the IRS disallowing the $2100 credit.  We are confused as to how to proceed and have several questions:

1) Are we entitled to the $4200 Recovery Rebate Credit? (2  times  $1400, plus $1400 for dependent).

2) Should we have shown $3500 in Economic Impact Payments as opposed to $2100? In other words, should we have added the $1400 received by our dependent to  our  $2100?

3) If the answer to the above (#3) is yes, should we have claimed $700 ($4200 less $3500) on Line 30, Form 1040-SR?

4) Once we find out the correct answer to the above question(s), what should our recourse be as far as responding to the IRS?    

Thank you in advance for all your responses.    

[VolvoGirl]

How much was on your 1040 line 30?  You better double check your bank statements and check your IRS account (both accounts if married) to see what they sent you. The 3rd Stimulus started coming out in March 2021.
https://www.irs.gov/payments/your-online-account

You should have got 2800 for the 3rd stimulus payment.  Maybe even 4200 for you and spouse and dependent based on your 2020 return.   Where did you get 2100?  Are you going by the letter you got from the IRS?  They send a letter to each spouse for half.  So 2100+2100 = 4200.  Double check your bank account.

[Critter-3]

Chances are you either did not get both letters saying you got $2100 advance stimulus each ( for a total of $4200) so you only entered $2100 and not the full $4200  you did get.  Or you did get both notices and thought they were a duplicate notice. 

The $4200  advance would have been for 3 people listed on the 2020 return.  And it is also possible your dependent also got a $1400 advance if they get SS benefits.  So not only did you get all of the stimulus in advance it seems like you got more than  you should have but the way the rules are written you get to keep the excess since it was an IRS error.  

[NCperson]

1) check your bank account for March-May, 2021.  The fact that the IRS made the adjustment means they believe they sent you the $4200.  There were TWO letters, one adressed to each spouse and they were to be ADDED together.  So the answer to your first question is 'probably not'.  Again, checking your bank account will confirm that you received the $4200 already.

2) the way the 3rd stimulus worked is that the IRS paid out the stimulus in March, 2021 as an ESTIMATE of what you were due.  Then the 2021 TAX return was ACTUALLY what you were due.  If the ESTIMATE was LARGER than the ACTUAL, you were NOT obligated to pay back the difference (in other words LIne 30 could not be less than zero).  I suspect you received $4200 as that estimate and were eligible for $4200 on your 2021 tax return, so Line 30 should be zero (which is how  the IRS effectively adjusted Line 30)

3) on your dependent, can you please explain whether they received the $1400 as a stimulus payment in march-may, 2021 or on Line 30 of their 1040 tax return.  They way you wrote it, THEY received the $1400;which is different than YOU receiving the $1400 as your dependent.  Can you please explain more specifically  regarding the $1400 that went to your dependent?  did THEY get it or did YOU get it? it matters