Recovery Rebate Credit for stimulus received in 2021

[hobbsrhh]

My wife & I filed separately on our 2020 tax return in 2021 with each of us claiming 2 of our 4 children. Each of us received a 3rd stimulus check in early 2021 in the amount of $4,200 (1 parent, 2 children).  Using the turbo tax software for the 2021 taxes in 2022, we are still filing separately, but this year I am claiming all 4 kids & my wife is claiming none of the children. The results in the software calculating a rebate recovery of $2800 for me since the 3rd stimulus I received was based on my 2020 tax filing status & dependents, (i.e., $4200) but my status & dependents on the 2021 return calculates a $7000 stimulus based on myself & 4 dependents resulting in the $2800 rebate. For my wife, however, she received a stimulus of $4200 in 2021 based on her 2020 filing, her 2021 filing with 0 dependents would calculate to only a $1400 stimulus, but the software indicates overpayments are not recaptured. Is this correct? FYI, even the free filing options on the IRS site calculates the same results.

[MinhT1 · Accepted solution]

Yes, this is correct.

As you are claiming 2 more children compared to 2020, you are entitled to a recovery rebate credit of $2,800.

As for your wife, she does not have to repay the stimulus for the 2 children that she does not claim this year.

The IRS says: No, there is no provision in the law that would require individuals who qualify for a Third Economic Impact Payment or an additional payment based on their 2020 or 2019 information, to pay back all or part of the payment if, based on the information reported on their 2021 tax returns, they would have qualified for a lesser amount.

Please read this IRS FAQ for more information.

[hobbsrhh]

Thanks for the confirmation. It sure seems like this is a major glitch in the process since our family, as a whole, benefits by $2800 merely by changing how we claim the kids.

[Critter-3]

Yep ... this was a legal loop hole left in the system that you can benefit from.   Of course if you each got any advance CTC payments then if she is not claiming any kids this year she could have to repay some or all of the advance however you will get the full credit for the kids you did not claim last year ... another legal loophole.