Filing 2021 Taxes when 2020 Amendment has not been processed by IRS and 3rd Stimulus Impact

[ETFtrader]

We e-filed a simple amendment for the 2020 tax year which was accepted by the IRS in May 2021 but has still not been processed as of April 10, 2022. 

The impact of the amendment was to lower our AGI, which resulted in: (1) Additional Federal and State Tax Refund (2) Additional1st & 2nd Stimulus amounts and (3) Additional 3rd Stimulus amount due to our AGI now falling below the phase-out threshold. Items (1) and (2) were calculated by TurboTax and included in the amended return. Item (3), the increased 3rd Stimulus amount, was NOT calculated by TurboTax since at the time of filing there was lack of clarity from the IRS in how it would handle this (supposedly was going to be done by the IRS/Treasury as part of a "reconciliation process" -OR- it would be done as part of the 2021 tax filing process). 

In 2021 we received a 3rd stimulus amount (the 2021 Economic Impact Payment) that was based on our ORIGINAL 2020 tax return (before amendment). Those EIP amounts are included in Letter 6475 from the IRS. I believe these are to be included in the 2021 filing, but I am not sure. 

My question is, what, if any, amounts from the amended return should be included in the 2021 tax filing to ensure we receive the additional 3rd stimulus amount that is owed? Is the expectation that the IRS is calculating the increased 3rd stimulus amount as part of their reconciliation process or does it need to be "requested" via the 2021 tax filing? 

[KrisD15]

The Third stimulus payment is for tax year 2021 and the amount is based on your 2021 income. 

Since no one had filed for 2021 yet, when the payments were issued, the IRS used 2020 information and income to issue the third stimulus payment.

If now, after filing the 2021 tax return, it looks as if you are due more payment, that additional amount (for the third stimulus only) will be given to you by way of the Recovery Rebate Credit. 

The credit need not be "requested". The TurboTax program will ask for the amount you received and give you the credit for the "missing" payment if applicable. 

If you are not eligible, the program won't bother asking about any amount received. 

The First and Second payments were for 2020, so if your 2020 income changed on an amended 2020 return, that might affect the recovery of the first and/or second payments if you received less than you are now showing as eligible for.  

[ETFtrader]

Thank you, this is very interesting! I investigated this further and you are correct, the 3rd stimulus payment was in fact an advance payment for 2021 and was based using 2020 tax filing information. 

I am now curious, if the government paid us a 3rd stimulus based on our initial 2020 tax year filing, but now when we file your 2021 taxes and we don't qualify per the worksheet since our income went up substantially in 2021, do we need to refund the amount they paid and shows on Letter 6475?   

If yes, where does TurboTax evaluate this and what form or line is it reported on? My assumption is the amounts that appear on Letter 6475 for 2021 EIP are only the 3rd stimulus payments and does not include the 2nd or 1st stimulus amounts.

[RobertB4444]

No.  The stimulus was issued based on 2020 income.  If you qualify for more using 2021 income then you'll get more.  If you qualify for less then they're letting you off the hook.  It's one of those "it only matters if it works in your favor" things.