3rd Stimulus payment

[Dependable]

I have a client whose daughter in 2020 filed her own return and received $1200 & $600 stumulus because she was working.  In 2021 she received a $1400 check but was not working and was a dependant of her parents and they filed for her stimulus.  The IRS sent a notice disallowing her stimulus on the parents return.  She is age 22 and a full time student in 2021.  Is this disallowance correct and if not ow do I go about correcting it?

[sjrcpa]

How much was the parents' income?

How much EIP did they receive?

What, precisely, did the IRS notice say?

[Dependable]

The parents 2021 AGI is $111K.  They received their $2800 and the program added $1400 for their dependant.  The IRS notice said she did not deserve $1400 and they now want it back.

[Just-Lisa-Now-]

Sounds like IRS is trying to curb the double dipping of the stimulus...did the daughter actually not qualify as a dependent in 2020, or did they just do that to get the stimulus?

[Dependable]

She was a dependant in 2021 when she was a full time student.  She worked in 2020 and wasn't technically a dependant.  I agree it could be considered double dipping but where is that written.  The tax software gave her that last stimulus with those facts and the IRS said no?

[Just-Lisa-Now-]

so in 2020 she paid for more than 50% of her own support? Just becasue she worked doesnt mean she wasnt a dependent.

[Dependable]

Lisa I almost always agree with you.  The IRS gave 5 items that may have caused disallowance of which I think none apply.  ss#, name, age, parents income and math error.  Client not happy and i'm not sure how to proceed.

[Just-Lisa-Now-]

Im not sure how to proceed in this situation either.

I didnt let any of my clients try and pull this with their kids in 2020...dep in 2019, not a dep in 2020 (when the free money was being doled out) then a dep again in 2021....looks kinda sus to me.

[Dependable]

Thanks very much for your thoughts and quick responses.  I think I can argue both sides of the issue.  I guess I'll sleep on it.

[qbteachmt]

"The IRS gave 5 items that may have caused disallowance"

The payments are Advances based on the tax returns on file.

In the 2021 filing, "could be a dependent" is also one of the items. Just because you file your own return and have a filing requirement, you are still supposed to show if you could be claimed or not by another taxpayer.

If she got the advance payment and now the parents state she is their dependent, then she should not have gotten the payment, which was for 2021. The point being, one payment has been made in advance, so there is no further amount to be paid.

Did you want to fight to get a second payment?

If the family is mad, shouldn't they fight among themselves?

[Accountant-Man]

If she got the prepaid 1400 because of 2020 filing, then when her parents rightfully claimed in for 2021 they deserved the 1400 BUT SHE ALREADY GOT IT, then her parents don't deserve it, too.