Overpaid EIP

Forum|Forum|4 years ago
February 19, 2022
1 reply
15 views

I've decided to track how much EIP#3 was paid out to clients that would not have qualified for the $1400 had the government waited to give as a credit on the 2021.

I've had several single taxpayers that received the $1400 based on 2020 income but do not qualify based on 2021 income.

I have one family that was overpaid $4200. 2020 return was not filed before EIP#3 was issued so parents received based on 2019. One dependent on 2019 was dropped from 2020 return and another dropped from 2021 return - overpaid $2800. The child dropped from 2020 return received $1400 but then 2021 income was actually over threshold - overpaid $1400.

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rbynaker

Level 13

But it's not really overpaid. Congress wrote the rules and the IRS followed them (well, mostly). If the rule was supposed to be "based on only 2021" then there could have been a claw-back (or even a limited claw-back based on AGI like the ACTC mess).

So it sounds like you're just tracking how much you think should have been paid had you been the one to write the tax law.

Rick (with a possibly biased opinion since my $1,400 was based on 2019--but if the rules had been different and I known that ahead of time I would have changed my 2021 Traditional/Roth 401(k) mix accordingly or waited until 2022 to cash out some capital gains.)

dkhAuthor

Level 15

Agreed - technically not overpaid

Agreed - tracking how much I think should have been paid had I been the one to write the tax law.

rbynaker

Level 13

Don't get me wrong, I'm not thrilled about loopholes you can drive a truck through (especially if the truck has MFS written on the side of it) but Congress had every opportunity to learn from their "mistakes" on EIP1 and EIP2. Best they could come up with for EIP3 was to direct the IRS to issue regulations. But if you think about it, anything the IRS could have come up with for regulations would have (or at least could have) directly contradicted what Congress put in the law. Who gets priority? Either the party who got the advance--as directed by Congress in the law--or the party who now claims the RRC--as directed by Congress in the law. If Congress had stated (or even hinted) that the one party had priority then regs could have specified how that gets handled on the tax return. The IRS may come up with regs at some point (let's face it, they're about 20 months behind in getting anything done) but for the most part it's too late now, returns are already getting filed with (legal) double dipping.

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