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Third Stimulus Payments and Tax Reporting for 2021

athaureaux6
Level 7

Hi online commnunity

Does anybody know how they are going to treat the 3rd stimulus payments for taxpayers who have shared custody of a dependent? I heard the IRS has eliminated the "double dip" loophole from the 1 and 2 stimulus but there is no clear cut clarification about how they are going to to do it. 

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athaureaux6
Level 7

Thanks Bob, that is exactly what I read. It seems they have not figure out yet how to handle this but it looks it is going to be exactly what you said, I read they are encouraging both parents or both taxpayers to have a communication about this subject but like you said, I am expecting a better resolution soon. Thanks. 

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qbteachmt
Level 15

Pub 17 draft:

"Recovery rebate credit. This credit is figured like last year's economic impact payment, except eligibility and the amount of the credit are based on your tax year 2020 information. For more information, see the instructions for Forms 1040 and 1040-SR, line 30, and the Recovery Rebate Credit Worksheet to figure your credit amount. "

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BobKamman
Level 15

That looks like it came from the 2021 edition of Pub 17, for use in preparing 2020 returns.  On the 2021 Form 1040, the amount of the Recovery Rebate Credit will be based on 2021 information.  The ARP legislation in March 2021 had some language expressing Congressional hope that IRS would figure out a way to avoid double dipping, but I don't think that has happened.  They do make you pay it back if you received ACTC for someone not a dependent in 2021.  

athaureaux6
Level 7

Thanks Bob, that is exactly what I read. It seems they have not figure out yet how to handle this but it looks it is going to be exactly what you said, I read they are encouraging both parents or both taxpayers to have a communication about this subject but like you said, I am expecting a better resolution soon. Thanks. 

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TAXOH
Level 11
Level 11

https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-t...

If you make under a certain amount the ACTC won't need to be paid back.

athaureaux6
Level 7

Hi I appreciate your link but I am asking about the 3rd stimulus payment not the child tax credit. But Thanks anyway. 

TAXOH
Level 11
Level 11

I meant to respond to Bob's post where he said the ACTC would have to be paid back.

What do you mean by double dipping?

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dkh
Level 12

Double dipping --  divorced parents getting stimulus for child twice. IRS sent stimulus based on 2019 return  on which father claimed child.   Mother claims child on 2020 return and receives stimulus also.

Oh I see, thanks.

>On the 2021 Form 1040, the amount of the Recovery Rebate Credit will be based on 2021 information.<

Would you mind pointing me to the source on this? That would make sense but in the 2021 1040 now available in Pro Series - and I do realize it's not final - the Recovery Rebate credit worksheet asks for EIP 1 and 2 received and bases the RRC on 2021.   Why would it ask this if EIP 1 and 2 were based on 2020 returns? Is it just not updated?  

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dkh
Level 12

It is not updated. Someone mentioned it in another post.

athaureaux6
Level 7

As soon as they update it, EIP I and II  should disappear. They are not needed for the tax year 2021. 

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