Recovery Rebate Credit - The amount was computed incorrectly (683D)

[OverCat]

Hey all you Tax Accountant Professionals (or Level-Uppers, or whatever you may be), if you could indulge me for just a moment and put yer wrenches down and look away from your motorcycles, I would like to tell you the answer that none of you have been able to figure out. I apparently discovered this whilst wandering around lost in the internet looking for ballet lessons over the course of the last 30 minutes of so. 

Log into your own IRS website and look at your records. The path is "Account Home > Tax Records". Right there, you will find the following heading and associated information (read it carefully, I have provided the bold highlighting for you):

2020 Economic Impact Payment Information

Use these amounts to calculate any Recovery Rebate Credit on your Tax Year 2020 return.

If you file as Married Filing Jointly, each spouse should see their own amount within their own account. All amounts must be considered if filing jointly in 2020.

<END IRS WEBSITE INFO>

There is the answer for all you motorheads! When the return is a MFJ, each of the "joints" needs to login to their own IRS account and to determine the amount paid. Equally, each of the "joints", if needed, should verify the amount was actually deposited into their account (or accounts). I think if you pull the string far enough, you will find the total amount paid to the "joints" is equally divided and reported between the two accounts and is therefore accurate (for MFJ). This is the exact case for me and my "joint". Also, this may be why there appears to be a strange and consistent anomaly in the complaints (lots of them on the internet about this issue whether it was from Lacerte, TurboTax, TaxSlayer, or any other program), that the IRS was "taking back" exactly 1/2 of the credit.

So, get back to your motorhead'n and back to guzzl'n whatever it is y'all guzzle, cuz, PROBLEM SOLVED - GO TELL YOUR CLIENTS!

You people are a hoot!

[qbteachmt]

"I would like to tell you the answer that none of you have been able to figure out."

That's a big statement for someone who is lost on the internet. And you are wrong, of course. Most of us know what we are doing. The rest are asking for help confirming their software is right, because they used it for their Paying Clients, to file taxes. The tax laws kept changing, and the software had to be updated through the timeframe of doing their jobs for their clients.

It's not your issue at all. Unless you are using Lacerte, and you think the program has a mistake?

It's a shame you are not informing the TurboTax forum. Because that is how these Peer Communities function. You give them info that helps everyone in the same situation as you. You Participate in the right place, and everyone benefits. Your answer isn't a Lacerte issue. So, it's no help here. There is a Tax Talk Subsection you could have used, if you cared about the forum here or your issue at all. Instead of just wanting attention, of course.

This is Not what it is called: "Log into your own IRS website and look at your records."

It's your Tax Account: https://www.irs.gov/payments/view-your-tax-account

What we have, here, are our Intuit Accounts. You are still lost on the internet.

The IRS provides the resources, and that's why we direct you, when it is your own issue, to make your own account at the IRS to get your own transcript. The people here, Working, are Working for their clients. They don't need to log into their own accounts, because they are not working on their own tax forms. On The Job isn't the same as your issue. Needing help using Lacerte isn't the same as your issue.

Everything you provided is good info, except you put it all in the wrong place on the internet. You don't need to seek attention like this. The people that need your help would likely appreciate your help. Why are you letting them down? Why are you bothering this community? The professionals here have these resources and information available, already.

[joshuabarksatlcs]

Not even close.  Not even a cigarette.

First, I won't speak for my colleagues, but I and my dear spouse for two did NOT get any EIP.  Our AGI was just too high.  Just a statement.  NOT bragging.

Second, your point had been discussed here in the proverbial dead-horse and all other kinds of dead-animal ways.  (Out of respect for Joshua, dead-dog is excluded.)   

Let's cut and dice.

H&W got a total of $2000 in EIP (based on 2018 and/or 2019 AGI).  Their IRS records, according to you, and according to reality, showed $1,000 each. 

H $1,000.  W$1,000.  

Let's say their entitled amount -  based on 2020 AGI - was higher, and was 2,800.  (If the entitled amount was lower, NO clawback.) 

If properly reported, Line 30 RRC would show $800.  (2,800 Entitled - 2,000 total EIP).

The bank record (plus perhaps the debit card) would show total receipts/deposits of $2,000.  

IF the couple told me they got only $1,000, Line 30 would show $1,800.  IRS would adjust down to $800.  the adjustment would be $1,000, which would be half of their total EIP or the amount on either spouse's IRS records as referenced/suggested by you.

That's why my fellow colleagues have been screaming in their own voices and tones and pitches and words "Check the accuracy of the EIP amounts provided to you from your clients!!!"

Now why would the client (in that example) tell me only $1,000 was received?  And in your case, why would you compute Line 30 with only the amount on your or your spouse's IRS records (1/2 of the total), instead of the FULL amount?  This is a bit mind boggling to me.   (Because I never learned how to boggle my own mind, let's just skip this rhetorical question.)

Here are the possibilities answers, though:

1.  One of them looked at his/her/its IRS record as you suggested, and told me his/her/its EIP amount and I treated it as the total, AFTER confirming with him/she/it/them that the amount provided to me was the total.

2.  One of them cashed the check/debit card/whatever and bought bourbon or lost it all in poker without letting the better (or worse) half know. 

3. ????

In any case, in the case that was originally discussed in this thread, the Asker (PPECPA) swore that his/her/its client(s) swore that (1) the total EIP amount was accurately communicated to him/her/it; (b) the total EIP matched to the bank deposit records; and (c) 100% of the EIP was deposited to the bank.  Yet, given all the heavy duty swearing, the fact remained that 50% of the total EIP was adjusted out.   If all those sworn statements were facts, one explanation could be that some kind of mess-up existed in the IRS records, or in the software computation.  

Rest assured your ballet-related info was NOT new in this forum.  Everyone here may be screaming either tomato or tomahto or (Canadians) tomaehto or (those under the Tuscan sun for too long) toMAYto, but we all know our bikes. 

And Tomatoes.  

For the love of taxes, please don't project the solution to your problem as the universal truth.

[pgsinclaircpa]

Just this week I have had 6 clients so far that have said they received notices from IRS changing the recovery rebate, and the amounts entered in Lacerte were correct. Is there a problem with the calculation Lacerte is doing?

[joshuabarksatlcs]

There have been discussions along this line in a few other threads.  So far, my fellow tax professionals' responses are still along the line of:

Check your math; Check clients' info.

Folks who raised the questions would then turn quiet. 

@PPECPA originally rode on this dead horse.  He stated there was NO mistake on the taxpayer / preparation ends.  Perhaps he will update us after 10/15 on his findings.

[jfindley]

I too have had clients with IRS adjustments. When I review the tax return I find that the client received their stimulus through direct deposit and Lacerte is calculating an added tax credit for stimulus. The IRS is adjusting that added amount out of the "paid taxes" for your client, thus reducing tax payments by the errant credit. For example my client is married, no children,  income is below the required threshold for full stimulus payments. My client received two stimulus payments in 2020 as follows:

$2398

$1200

Lacerte added the $1200 as an additional tax payment thus overstating my clients payments by $1200.  The IRS caught the error and deducted the $1200.  The reason it was added had to do with my input of the payments into Lacerte. I put the first stimulus as $1,200 and the second as $2,398.  However,  it was actually the other way around, the first my client received was $2,398 and second $1,200.  The program calculated that my client should receive an additional $1,200 as the first stimulus is $2,400 for a couple at or below the threshold of $150,000.

The program thought the stimulus was short $1,200.00 and added it back as a tax credit. Thus the reason for the IRS adjustment.  Unfortunately, Lacerte should be looking to the overall amounts received as the two payments received were the amount they should have received, short $2.00. The stimulus payments by the IRS for the first distribution was $1,200 per qualifying taxpayer. The second payment was $600.00 per qualifying taxpayer. A qualifying married couple would be eligible for a grand total of $3,600.00 between the two payments. 

Hope this clears it up.

[jfindley]

See my response on this. Make sure you entered the correct stimulus in Lacerte in the correct order or the software will calculate that your client received an underpayment.  

[PPECPA]

Hi jfindley

Sorry have not checked in for quite some time.  Much to my chagrin, the client that I was working with on to address the recovery rebate credit issue turned out to be simple yet frustrating.  After much back and forth with the IRS, we learned that my client did indeed receive the additional Economic Impact/Stimulus  Payments.  The client provided me with the incorrect amounts they received and also failed to provide me with a payment.

The return was wrong because of this. 

Looks like I found the smoking gun. 

Sorry I wish I could be of more assistance on this.