Intersection between PATH Act and Recovery Rebate Credit

[ejdtaxman]

I have a novel question that, hopefully, someone more knowledgeable than me on this can answer. 

A client has lived overseas for several years and has several children with a non-resident spouse. She has a SSN, and she recently applied for and was granted SSNs for her children. However, the kids have always resided overseas with her and her husband. 

I filed a 2020 1040 for her as single, claiming all children as dependents. Since this was her first return since she left the country in 2008, I knew she definitely didn't get any of the EIPs, so she should have had a credit for herself plus her kids. However, the IRS has given her a refund reflecting only the credit for herself. 

Worth noting is that when I attempted to efile this return last year, I got a rejection stating one of the dependent's SSN had already been used for that tax year. Theoretically possible, but very unlikely since she had gotten the SSN for them roughly a month before filing. So I just had her fill out an ID theft affidavit and mailed the return instead. After some correspondence regarding an unrelated matter, she finally received the reduced refund and that's where I am now. 

I called the PPL and was told that the SSNs weren't being recognized. I went over the history with the e-filing and that I had pictures of the SS cards and I've verified them. Then he did some more "research" and came back with the answer that the PATH Act disallows claims for credits when the SSN didn't exist for the tax year in question. I've tried researching this myself and can find no support for it. In fact, since the PATH Act was passed in 2015, I'm not sure how it could even speak to the RRC since it was 5 years prior to the pandemic, unless it was amended to do so and I can't find anything like that. Everything I read about the PATH Act concerns specifically the EIC and education credits. 

If someone can suggest any answer to this or tell me where to find the answer I'd be grateful. I've even looked on Lexis and am still striking out. 

[sjrcpa]

If she's married, why did you file Single for 2020?

[ejdtaxman]

Because husband has no TIN. 

[sjrcpa]

NTA for Nonresident Alien works. The choice for filing status is MFS or MFJ when a person is married.

I don't know  the answer to your credit question but might the PATH Act reference credits under IRC Sections xyz that could encompass later enacted credits?

[TaxGuyBill]

As was mentioned, if she is married, then "Single" is not an option.  She would either be Head of Household, MFS, or make an election to treat the spouse as a Resident to file as MFJ.

What is your actual question?  Are you asking if the children need a SSN number before the due date of the return in order to claim the Recovery Rebate Credit?  If so, the answer is "yes".

The law for the Recovery Rebate defines "valid identification number" by pointing to Section 24 for the definition.  Section 24 requires the SSN to be received before the due date of the tax return (which is from the PATH Act).

[sjrcpa]

Thanks Bill. I figured it was something like that but I didn't feel like looking it up.🙂