American Rescue plan question

[taxmoney101]

Hi there,

My daughter has filed her tax return 2020 as independent & based on it she has received $1400.00 as American Rescue plan direct payment. In tax year she appears to be dependent in my tax return so if i file her as dependent is IRS going to ask her to refund $1400.00 which she has received as American Rescue Plan.

Thanks

[ErnieS0]

No. Your daughter will not have to give back her $1,400 stimulus payment if you file her as a dependent on your tax 2021 tax return if she was legally entitled to the payment.

IRS says:

Q E15. Dependents: Can my 2021 Recovery Rebate Credit include an amount for a qualifying dependent if the dependent received the third Economic Impact Payment or someone else received the third Economic Impact Payment for the dependent? (added January 13, 2022)

A15. Yes, if you meet the eligibility requirements to claim the 2021 Recovery Rebate Credit. The amount of your credit may include up to $1,400 for a qualifying dependent you are claiming on your 2021 return.

See: Topic E: Calculating the 2021 Recovery Rebate Credit

[taxmoney101]

In 2020 she had few loans and based on that she has filed her tax return as independent. In 2021 she became dependent. When I am filing her as dependent I am seeing "credit for other dependent" as $500.00 in my joint tax return ( husband & wife) .  Is IRS going to come back and question her $1400.00 payment?

[ErnieS0]

No, IRS will not question it.

First, the $500 is not the stimulus payment. It is a separate credit. 

The Other Dependent Credit can be claimed for:
 

• Dependents of any age, including those who are age 18 or older.
• Dependents who have Social Security numbers or individual taxpayer identification numbers.
• Dependent parents or other qualifying relatives supported by the taxpayer.
• Dependents living with the taxpayer who aren't related to the taxpayer.

The $1,400 stimulus appears on Form 1040 line 30.

The third stimulus was an advance payment on 2021 taxes. The IRS didn’t have 2021 info last year so it used 2019/2020 info to send the advance payment.

The actual stimulus amount is calculated as part of the 2021 tax return. If the IRS sent too much, you don’t have to pay it back. If you got too little, the extra amount is added to your refund on line 30. If you got the right amount, line 30 is $0 (no change).

[taxmoney101]

Thanks again. like you said if the actual stimulus amount is calculated as part of the 2021 tax return, won't my daughter's 2021 return as dependent or not doing the taxes for 2021as she didn't have any income in 2021 impact her $1400 payment she received last year?

[ErnieS0]

No. If you were qualified o receive a payment last year based on your 2019/2020 tax information, you don't have to pay it back if you were not qualified in 2021.

The only people who have to pay the money back are those who should not have received it in the first place, such as a nonresident who was never qualified to get the money, but got it by mistake.

Your daughter was independent in 2020 so she qualified for a stimulus payment.