Filing MFS to get Recovery Rebate Credit

[jfjefts]

T/P's filed  (early) MFJ for 2020 and phased out of the Recovery Credit. Their 2021 incomes are $100,000+ and $70,000. If they file MFS, put all 4 children on the lower income spouse, the spouse gets the full $7000 credit (5 x $1400). The higher earner has to repay the Advanced Child Tax Credit, but that is minimal and offset by what the lower earner is getting.

Sounds to good to be true. Am I missing something

[Just-Lisa-Now-]

Many preparers are using this as a tax planning strategy. 

Of course its not that advantageous in Community Property States, but other states, it sure seems like the way to go.

[WinCPA1]

I have a similar situation, but wanted to file to take advantage of state savings.  However, in my situation there was TP, SP, and one dependent in 2020.  They had a baby in 2021 and received the $1,400 for three individuals.  The letter says each taxpayer received $2,100.  When I split the return and put both kids with the lower income earner to get under the threshold for child tax credit it is giving an extra $700 of Recovery Rebate Credit, so instead of $1,400, it is giving her $2,100.  The other taxpayer is having to pay back the advanced child tax credit, but of course is not having to pay back the $700 they received for the older child.  I found a link posted on one of these threads that said the credit could be up to $500 for the other parent, but that was in a divorce case.  Should I leave the $2,100 recovery rebate on the return, change it to $1,900 or only claim the $1,400 for the new baby?  It's still more advantageous to file separately regardless of which option I need to go with, but don't want to delay refunds for the client if possible.

[jfjefts]

Leave the $2100. It’s just another way that the government has found to give away money.

[taxes96786]

Do clients meet requirements to file separately?