How to override Recovery Rebate Credit

[Cricket0712]

My client qualifies for the Recovery Rebate Credit based on her 2019 taxable income. But she never received her first stimulus payment.  She did receive her 2nd and 3rd stimulus payments.  She graduated in 2019 and started a permanent job in 2020.  Based on her 2020 income, she does not qualify for the recovery rebate credit.  I called the IRS, they said that the 1st and 2nd stimulus payment is based on 2019 taxable income.  Therefore, if she qualifies for the payment, she can recover the payment on the 2020 return.  How do I override the field to insert $1,200 for the payment owe to her? 

[dhenrycpa]

While the original stimulus pmts were based off of 2019 income, the Rebate Recovery Credit is only based on 2020 and as such, in your situation, there is no way to force or recover this amount as a credit.

[sjrcpa]

EIP 1 and 2 were advances on the 2020 Recovery Rebate Credit. If, based on your 2020 info you do not qualify for the RRC you don't qualify.

If you received EIP 1 and/or 2 anyway, you don't have to repay it.

[qbteachmt]

"I called the IRS, they said that the 1st and 2nd stimulus payment is based on 2019 taxable income."

That's not correctly stated.

Perhaps it would help to review what is really happening for EIP “stimulus” funds: The funds were paid out as Advanced payment against a projection. The first two payouts were projected based on 2018 or 2019 tax returns, but the eligibility is part of tax year 2020 as Actuals. You use the 2020 return to reconcile what a person is entitled to, against what they got.

If the person is not a dependent in 2020, then they would be eligible for consideration as individual filers. That doesn't mean "not being claimed." It means "no longer qualifies as a dependent." You must correctly address whether they Can be Claimed as a dependent on someone else’s tax return.

The third payout which started in Jan 2021, has different eligibility rules as to dependents and this payout is a projection, using 2019 or 2020 tax returns, then reconciled against Actuals on the 2021 tax return.

You might want to bookmark these links and read the IRS guidance.

Interactive wizards portal includes one for determining dependency:

https://www.irs.gov/help/ita

And:

https://www.irs.gov/newsroom/economic-impact-payment-information-center-topic-a-eip-eligibility

https://www.irs.gov/coronavirus/second-eip-faqs#Eligibility

https://www.irs.gov/newsroom/irs-is-issuing-third-round-of-economic-impact-payments

One for each of the three EIP “stimulus” payments.

[Cricket0712]

That's not true. I called the IRS and the agent confirmed that I can override the field.  The agent confirmed that stimulus 1 and 2 payments were based on 2019 taxable income.  When filing to recover the amount on 2020 return, they will verify the amount against what was paid and not paid and will issue the amount along with the tax refund accordingly.  I ended up paper filing the form for the client to recover the amount due to her. 

[abctax55]

Hope you got that IRS person's ID number .....  you do know that what 'they' tell you can't be relied upon legally or professionally?

Report back in six months or so once that paper return is processed, 'kay?

[qbteachmt]

Let me show you how to Correct this statement:

"The agent confirmed that stimulus 1 and 2 ADVANCED payments were based on 2019 taxable income."

But the QUALIFICATION is based on 2020 actual income.

If you don't read the links we give to resources, why bother to post on this forum about the issue in the first place?