When you started your return in some versions of TurboTax, the software assumed that you did not receive any stimulus payments. So it started your return with both of the stimulus payments added to your refund.
When you then told TurboTax that you have received the payment or payments, it deducted that amount from your refund so that it was not a double payment.
There is no tax on the stimulus payments, but in some cases the refund goes down by the amount of stimulus payments have already been received.
[edited 2/1/2021 | 07:55 pm PST]
That's not the way Premier does it.... so far. When I got to the end and entered the numbers the report was that I got paid what I should have and nothing else changed. I suspect the issue has more to do with reporting a stimulus not in agreement with the software's algorithm
God forbid I'd go through the tax prep seeing my meager return this year only to see it turn into a huge debt because "I already got it."
Please check your sources.
I am really confused as to how the stimulus payments have affected our tax return. Until I get to the screen where the stimulus payments are entered, we are receiving a federal tax refund of $2243. When I enter the 2 stimulus payments of $2400 and $1200, it changes to owing $1300. How can that be if this is not taxable? It does not affect my State return at all. Very confused as well as the Turbo Tax agent that I was online with today. Tia for any help.
Are you in Oregon? There is a complicated and confusing calculation for OR returns that results in an 8.75% tax on stimulus money.
Here's what the HELP section of TT 2020 states about the Stimulus Money. How can I go from a refund to owing when I enter those payments??
How will the second stimulus impact me?
The IRS recently began issuing a second round of stimulus payments to those eligible. Unfortunately, because of an IRS error, millions of payments were sent to the wrong accounts and some may not have received their stimulus payment.
Depending on your situation, you could get up to $600 per individual, plus $600 per qualifying child. The IRS will look at your most recent information on file—likely your 2019 tax return—and disburse your payment either by direct deposit, check or debit card.
Rest assured that these stimulus payments (both first and second) are not considered income, and therefore are not taxable. They won’t reduce your refund or increase what you owe when you file your taxes this year. They also won’t affect your eligibility for any federal government assistance or benefits.
Before you enter the amount of the stimulus payments at the screen Did you get a stimulus payment?, you have been given the full Rebate Recovery Credit (the equivalent of the two stimulus payments). This can be found on line 30 of the 2020 Federal tax return. At this point, this is an 'incomplete' Rebate Recovery Credit.
The refund monitor on your screen displays a refund amount that includes the stimulus money as part of your 2020 refund. When you enter the amount of stimulus you received, the refund monitor adjusts to account for this.
See this TurboTax Help.
This TurboTax Help states that the Economic Impact Payments (both the first and second) are not considered income, and therefore are not taxable.
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The problem is the starting point and the TT version. I use Premiere on a Windows PC every year so I import last year's return to begin preparations. So my starting point is ZERO when I start a new return....and TT assumes I got paid the "stimulus" as designed. Then, when I get to the very end and confirm that I got both, nothing changes.
For others (I hear Deluxe does this), it assumes you DID NOT get the checks and TT pre-loads them to your return. Then, when you get to end and tell TT you actually got the stimulus it removes it from your 2020 return resulting in an unwelcome surprise.
When I first saw this thread it worried me until I realized my product didn't have that heuristic programmed into it.
I hope they standardize TT next year to answer that question at step one, line one so there are fewer surprises.... Either way, they are going to lose some customers.