recovery rebate credit

[JONI9611]

If a person was claimed in 2020 and his parents received the 1400 for him. Is he eligible for it when he does a 2021 tax return and is not a dependent.

[Just-Lisa-Now- · Accepted solution]

yes.

[Terry53029]

@Just-Lisa-Now- you must be taking lessons from @IRonMaN on these long winded replies. 😁 

[IRonMaN]

Yup

[joshuabarksatlcs]

Y!

[sjrcpa]

Y'all are learning. 😄

[IRonMaN]

I kinda like the Dragnet approach - just the facts ma'am.  Besides, spending 2 hours writing War and Peace on one post means there are other folks waiting for help that you can't get to.  More power to folks that want to reference specific tax codes, court cases, etc.  But I have also been here long enough to know that probably 98.27278227888666% of the folks posting here want a yup or a nope and don't really care about the details. 

Years ago I worked for a firm that had a main office in the metropolis and we were the Sputnik office in the boonies.  From time to time we would have to call the main office with a tax question.  The tax manager was a smart guy (and a nice guy) but he would ramble on endlessly throwing in all sorts of extra information you didn't really need to know.  When he was done, we would pretty much end the conversation with a "Bruce, was that a yes or a no"?

[joshuabarksatlcs]

When I signed up here, I made a pledge to Intuit to cater my responses to the 1.72721772111337% of the our colleagues, PLUS 24.37016568724391% of the fake or quasi professionals whom @BobKamman would shoo away with a large, purple, and all-cap font.

From the accounting analytics standpoint 98.27278227888666% is a bit fishy, as only 5 of the 10 digits were present out of the 16 places.   Perhaps your grandkids were playing with the other number blocks and blew the randomness for you...  My hands are tied for my 1.72721772111337%

[joshuabarksatlcs]

@sjrcpa is probably sighing, "Around and around they go again...."

[BobKamman]

@joshuabarksatlcs  I BEG YOUR PARDON, I DIDN'T USE AN ALL-CAPS FONT

It would be great if we all had time to read and reply to all these Turbot fishing for answers.  But they're like roaches -- for every one you see, there are a hundred lurking in the woodwork, waiting to come out. 

Maybe if Intuit made them sign a disclosure agreement, allowing us to see all of their tax return. . . .  

[joshuabarksatlcs]

RE: I BEG YOUR PARDON, I DIDN'T USE AN ALL-CAPS FONT

Since you begged, you're pardoned.

You see?  That's the problem when we read things too literally.

[BobKamman]

@joshuabarksatlcs 

I'M GLAD I NEVER PROMISED YOU A ROSE GARDEN 

[joshuabarksatlcs]

RE: I'M GLAD I NEVER PROMISED YOU A ROSE GARDEN 

DITTO

[jnd2546]

Does anyone else disagree with this "yes" answer?  FAQ's for Third Stimulus and RRC seem to indicate that if "someone was claimed as a dependent in 2020, they would not be eligible for RRC in 2021. 

[The-Tax-Lady]

They are absolutely eligible to claim the $1400 RRC. The 2021, 3rd EIP payment was an advance payment against what was actually filed on the 2021 tax return. There is no penalty or payback for the original recipient of the $1400 for a dependent claimed on their TY2020 return.

The former dependent, now filing in 2021 as a non dependent taxpayer becomes eligible for the RRC.

[jnd2546]

I very much want to believe you, but tell me how the sentence on page 6 of the latest FAQ's 25 March 2022 ( Topic B Eligibility),   " What can I do if someone else claimed me......) doesn't mean that if the parent got $1400 for that child due to claiming them in 2020, that would invalidate that child from RRC even if they are not claimed by the parent in 2021?

[athaureaux6]

In my opinion, they are going to start making the taxpayers return the dependent portion, the same way they are doing with the Advanced CTC. I already know somebody who was in this position we are discussing and that person, believe it or not received a letter saying that a stimulus check was issued to that SSN in the past. This is exactly what somebody said about the FAQ of March 22. I have already seen stimulus letters for example of a married couple and a dependent in 2020 receiving the letters separetely, 2800 and for couple and 1400 for the dependent. Why do you think the IRS is doing that? In my opinion, to avoid the double dipping, just like the child tax credit. Good morning from NJ everybody.

[qbteachmt]

@jnd2546 

It's the difference between Advance Payment, and Actual Eligibility.

The payouts are based on projections from the most recent tax forms on hand at that time. The benefits are reconciled to Actuals on the 2021 tax return. That's because life changes.

"If you were claimed as a dependent on someone else’s tax return for 2020, you were not eligible for the third-round Economic Impact Payment. If no one can claim you as a dependent for 2021 and you are otherwise eligible, you can claim the 2021 Recovery Rebate Credit, and must file a 2021 tax return to claim the credit."

Not being eligible for the payment in 2021 is not the same as being eligible for the funds based on the 2021 tax return.

[jnd2546]

So just to be clear, you believe it's OK to claim a RRC for a non-dependent in TY 2021 if they were claimed as a dependent in 2020 and their parents received an EIP of $1400 for them in March/April 2021?

[qbteachmt]

"Ok" isn't the issue.You don't really get to decide what is Ok. You follow the provisions that apply to your client. If you put your taxpayer's info into the program for their return, what is the result you get?

Let's try it this way:

2020 tax year is Meaningless, now. An advanced payout would have relied on 2019 or 2020 tax info on file at that time; whatever was on file for the taxpayer's household at the time the advance payments were being issued, is what got used. It has nothing to do with 2021, where people now got married, got divorced, had quadruplets, whatever. Some people matured out of being dependents.

Everything about EIP (RRC) #3 is based on that 2021 tax form Actuals. You enter the taxpayer's details, and you enter what that person got for advance EIP.

There are a lot of people taking advantage of the confusion on the part of Congress and the IRS, for EIP payments. Remember, this infusion was supposed to help people and help the economy recover, in general. If there is no provision to claw back amounts that should not have been paid, well, that hasn't been part of the regulations for any of the EIP. At least for the CTC, there is a repayment provision, which is waived if the person getting the money in error doesn't meet certain income limits (forgiveness applies).

Use the program you paid for. Let it do that calculation for you.

[jnd2546]

Let's not assume software is always correct ( especially if guidance that came out on 25 March is not necessarily incorporated.  It still keeps coming back to the use of the word "you" by the IRS and even in the question on the RRC worksheet. Following the RRC worksheet and if you take "you" literally as the client in 2021, the 2021 non-dependent client would be eligible for RRC in 2021 because "you" is taken as only the parent receiving the  $1400 on behalf of the kid. ( and who received the 6475 letter).

Prudence to me comes down to alerting the client that if they choose to claim the RRC, it is clearly ambiguous with the FAQ's and if they do receive RRC in their 2021 filing , there's a possibility that they OR their parents could receive a demand for payback when the IRS figures out what they want to do with the ambiguity they created..

[qbteachmt]

There has been no claw back from the multiple and overlapping previous EIP payments. There has been denial of credits, though. Don't confuse EIP and CTC.

Once again, and let me try to translate:

"If you were claimed as a dependent on someone else’s tax return for 2020, you were not eligible for the third-round Economic Impact Payment. If no one can claim you as a dependent for 2021 and you are otherwise eligible, you can claim the 2021 Recovery Rebate Credit, and must file a 2021 tax return to claim the credit."

If you, the taxpayer filing a 2021 return, were claimed by someone else in 2020, you were not eligible to get a payment. But now that you are filing a 2021 return, if you are eligible per the Act, you can submit here that you want the Credit, which is Refundable and will potentially result in you getting the money. Just not back when everyone else got money.

Don't confuse Payment and Credit.

[jnd2546]

You do a good job of evading the basic issue of the "IRS use of the word "you" and the only reason for the Recovery Rebate Credit exists is for people who would be eligible in 2021, but an advanced EIP was not issued to them based on data from 2019 or 2020 return.

I checked with NSTP to get their take on the issue. Several preparers have inquired. They absolutely agree the IRS has created ambiguity with the question/answer in Topic B of the FAQ's.

For now, they are telling preparers to interpret "you" literally ( i.e the filing non-dependent) even though their parent received EIP as a result of their dependency in 1019 or 2020 and go ahead and claim the RRC if otherwise eligible.

Prudence however would suggest you alert the now 2021 non-dependent client that ambiguity does exists from IRS and the outcome of their return could be different than filed if the RRC is claimed. .

[qbteachmt]

"You" is always the taxpayer.

You seem to want to debate a provision that makes no sense. Nevertheless, the provision exists.

[The-Tax-Lady]

The questions and answers are for the TY2021 preparation. If the taxpayer is asking "what can I do if someone else claimed me", I believe the part you might be missing is "if someone claimed me on their 2021 tax return"

In that scenario, the taxpayer cannot claim themselves and would not be eligible for the RRC on their  2021 return.

If they are not a dependent on a 2021 tax return and they did not receive the 3rd EIP, they are eligible for the RRC on their 2021 tax return.

[qbteachmt]

"If they are not a dependent on a 2021 tax return"

or are not able to be claimed...because that question exists: can you be claimed as a dependent on someone else's return? Confirming they are not a dependent but filing their own return, as many students did in 2020, simply to get their own payment for themselves.