Third stimulus - letter 6475

[dwible1]

I've been reading that the third stimulus payment is not taxable, but when I enter the amount the amount we received ($5600) into TurboTax, it is showing that we now owe $3035. What is going on? 

[LenaH]

Stimulus checks are not taxable. Before you entered your stimulus check, TurboTax was likely giving you the Recovery Rebate Credit, which lowered the amount of tax due, giving you a refund. The Recovery Rebate Credit is only for taxpayers who did not get the third stimulus payment and are eligible based on their 2021 tax return. However, once you entered the amount of stimulus payment received, it eliminated the credit. In return, this raised the amount of tax due. 

[dwible1]

Thanks for your quick response. It sounds like TurboTax is double-counting the credit we received. However, I am still confused. Does this mean I enter zero for the amount listed on the two 6475 letters we received? 

[xmasbaby0]

@dwible1 No----You enter the amounts that you received.  If you enter zero you will be trying to get the same stimulus check again and you cannot get it twice.

What you may not realize is that as soon as you began to prepare your tax return, the software was giving you the $1400 and it was shown on that "refund monitor" -----but when you entered that you received it already, the software had to reconcile the payment you received,   You cannot get it twice---so it looked to you like you "lost" $1400.   You did not lose it---you just cannot receive it twice.

[dwible1]

Thanks for the response! Ok, so to be clear, if we enter the amount we received ($5600), our refund of $2565, which is similar to what we normally get, is wiped out and we now owe $3035. So basically the stimulus was meaningless, other than just a "cash advance"?

[xmasbaby0]

Any way you cut it, the government gave you  $5600 last year.   That is the amount you would have received for four people    4 x $1400 =  $5600.   The IRS sent you letter 6475 showing that they gave you $5600.   You are required to enter that when you are preparing your tax return.     If you do not enter it, the software thinks you did not get $5600 last year and puts it on line 30.   That would be as if you are trying to get the $5600 twice.  You cannot get it twice.

If you put it on line 30, the IRS checks it.  They see that you already got $5600 last year.   Then they reduce your refund by $5600.   

So...if you owe tax due this year, it is for some other reason such as not having enough tax withheld from your paychecks or the loss of some other credit that you are no longer receiving.   Did you have any kids who turned 18?  If so you lost the child tax credit.

If you have two dependents----are they under the age of 18?   Have you entered the information for the child tax credit yet?   You should also have letter 6419 if you received the advance child tax credit payments between July and December.    That information also must be entered so that the software can reconcile the amount you received last year with the amount you can still receive as part of your 2021 refund.  If your dependents were over the age of 17 at the end of 2021, none of this applies to you.