EIP 3 payment

[Summit1]

my client received a direct deposit in March 2021 in the amount of $1400.00. Based on filing status and income they qualified for this amount. My client called me this week and advised me that they received a paper check form the IRS in the amount of $1,400.00. The check says Economic Impact Payment. My thinking is that this is an error and the money will need to be returned. Looking for additional guidance and opinions.

[sjrcpa]

Are they married? Children?

Receive Social Security?

[qbteachmt]

"In general, most people will get $1,400 for themselves and $1,400 for each of their qualifying dependents claimed on their tax return."

How many people?

[qbteachmt]

If you sign up for the e-newsletters to come to your email:

https://www.irs.gov/newsroom/e-news-subscriptions

this one came today:

e-News for Tax Professionals 2021-29

With this info:

https://www.irs.gov/newsroom/more-than-2-point-2-million-additional-economic-impact-payments-disburs...

[Summit1]

Spoiler

Single filer no dependents 

[Summit1]

single, receives social security, and no dependents 

[Summit1]

Single, no dependents

[qbteachmt]

You stated this: "Based on filing status and income they qualified for this amount."

But this info would be for 2021, which isn't over yet. The EIP 3 is the same as the others, which means, issued based on a projection, based on prior years' filings. And then reconciled on the 2021 tax return.

If this is definitely a duplicate payment, it can be void and returned:

https://www.irs.gov/newsroom/economic-impact-payment-information-center-topic-i-returning-the-econom...

[BobKamman]

Have they recently received a notice about their 2019 return?  I have seen some 2019 returns, without refunds, that were not processed until well into this year.  Some people received EIP#3 based on 2019, even though not eligible based on 2020.  I haven't seen one, but it's possible that some people received $1,400 based on 2019, and then another $1,400 based on 2020. 

What makes you think that it has to be returned?  At least, not until IRS can cite a statute that overpayments are not allowed.  Thousands of people are receiving overpayments, because their income or dependents have changed.  

[Summit1]

I understand that but in this client's case there will be no income change or dependent change in 2021

[Summit1]

No notices received about 2019 return. The amounts client was due for Stimulus 1 and 2 were correct and  were received by direct deposit. Stimulus 3 was received in early 3/21 ( 2020 return was filed on 4/10/21 ).The client's income was lower in 2021 than 2020 so it seems the IRS would know the taxpayer received the correct amount. There has been no dependent changes either. The other thing that makes me feel like it is an error is that the IRS sent a paper check for this latest payment. I efile this client and he makes all estimated payments through EFTPS.

I have not seen anything posted from the IRS that overpayments need to be returned but this the agency that has yet to process over 35 million 2020 returns.

[qbteachmt]

You stated the person receives SS, as well as filing a tax return. There could be duplication through this process. The March payment is not based on 2020 or 2021, obviously.

[Summit1]

I am still confused. The client did have taxable Social Security Benefits but that is already in the equation to determine Adjusted Gross Income. Also, the IRS website states how the 3rd payment is to be calculated and based on their document, the client received all he was due with the EFT payment that was received in March. It appears the IRS is making mistakes reconciling these payments.

Footnote:

I just spoke with the same client today (7/24) he just received a letter from the IRS on his 2020 return indicating he was due an additional refund because the Recovery Rebate Credit was incorrect. He did not receive the full $1200.00 on payment 1 because his adjusted income in 2019 was higher. He only received $887.80.  When preparing the Rebate Recovery Worksheet it allowed him an additional credit of $312.20 for a total of $1,200.00 on the first payment. The second payment of $600.00 was received as well. 

In the IRS calculations they are saying the Recovery rebate credit should be $801.65 not $312.00. 

[qbteachmt · Accepted solution]

"The client did have taxable Social Security Benefits but that is already in the equation to determine Adjusted Gross Income."

It's not the Amount. It's a payment mechanism. It's one of the ways they judge a taxpayer is entitled to EIP funding, and it can be a duplicate payment to the clients that are both SS recipients and tax filing entities. We've seen this posted here, already.

"Also, the IRS website states how the 3rd payment is to be calculated and based on their document, the client received all he was due with the EFT payment that was received in March. It appears the IRS is making mistakes reconciling these payments."

Yes; that's happening with EIP 1, 2 and 3.

"because his adjusted income in 2019 was higher. He only received $887.80."

Based on the Projection of what 2020 would be when filed, and projecting no changes from 2019, if it was already filed. Everything paid out was paid on Projection, and they all are based on whatever is the most recent tax info on file, even if, from 2018 to 2020, you had triplets and lost a spouse. Factually, everything is settled on the tax return, later.

"In the IRS calculations they are saying the Recovery rebate credit should be $801.65 not $312.00."

The IRS moves in mysterious ways.