2021 Stimulus Payment Question

[RWG1950]

My customers (MFJ) used their son as an exemption for the last time on their 2020 Federal return.
They received $4,200 in EIP payments in the spring of 2021. Their son is not going to be a dependent on their 2021 return.
The son, now living on his own, lives on the other side of the country.
Dad tells me junior earned $24K in 2021 and has filed his own return & was credited with $700 of stimulus. (not sure how this amount was determined)
My question is, do the parents have to pay back any part of the extra $1,400 they received for their 2020 dependent son.
Thanks for comments.

[DoNTaxesNow]

It is my understanding that they will NOT have to pay back any of the EIP they received for their dependent son. I also believe he would be able to claim a $1,400 Recovery Rebate Credit on his own 2021 return.

here is a link to the IRS Q&A for the 3rd EIP - Questions and Answers about the Third Economic Impact Payment — Topic H: Reconciling on Your 2021 Tax Return | Internal Revenue Service (irs.gov).

[spanel]

It is my understanding that they will NOT have to pay back any of the EIP they received for their dependent son. I also believe he would be able to claim a $1,400 Recovery Rebate Credit on his own 2021 return.

here is a link to the IRS Q&A for the 3rd EIP - Questions and Answers about the Third Economic Impact Payment — Topic H: Reconciling on Your 2021 Tax Return | Internal Revenue Service (irs.gov).

I'm on board with they don't have to pay it back, however they Did receive the $1400 while he was a dependent, therefor he did receive that payment and is not eligible for another $1400.

Chris

[Lion]

The son did NOT receive EIP3; his parents did. If the son is not a qualified dependent (whether or not his parents claim him) he can claim RRC3 on his 2021 return.

[ruthc]

Double dipping is being allowed!! Being paid out of OUR wages or savings!! And it will get worse...

[DoubleO]

So are those of you with married taxpayers who received all the EIP3 for themselves and dependents filing MFS returns to increase the RRC since each would only report half of the EIP received?

Are we comfortable that it is allowed with no later repercussions?

I know what the Fact Sheets say and the FAQs, but I'm worried about a clawback in light of 6428B(h)(2). Fact Sheets are only authority to get out of a penalty, not the underpayment of tax itself. I know opinions on other forums say it can be done and the likelihood of a clawback is very unlikely, but I don't want clients mad because they are having to pay back $1400, $2700, $3500, etc.

[Twin Turbo Z]

So are those of you with married taxpayers who received all the EIP3 for themselves and dependents filing MFS returns to increase the RRC since each would only report half of the EIP received?

Are we comfortable that it is allowed with no later repercussions?

I know what the Fact Sheets say and the FAQs, but I'm worried about a clawback in light of 6428B(h)(2). Fact Sheets are only authority to get out of a penalty, not the underpayment of tax itself. I know opinions on other forums say it can be done and the likelihood of a clawback is very unlikely, but I don't want clients mad because they are having to pay back $1400, $2700, $3500, etc.

Same thing with MFS couples moving dependents from one to another to take advantage of the same situation. Double dipping. But the consensus is its ok. I say inform your client and let them decide. Thats what we are going to do.

[Twin Turbo Z]

This is the faq from the IRS on the stimulus concerning 2020 Joint returns now filing MFS. Seems they are allowing it.

Q E11. Joint Economic Impact Payments: What if my spouse and I received a joint third Economic Impact Payment and we are not filing a joint 2021 tax return?

(added January 13, 2022) A11. When third Economic Impact Payments were jointly issued to two spouses, each spouse must claim half the payment when calculating the 2021 Recovery Rebate Credit if they are not filing their 2021 tax return jointly. Each spouse must enter half the payment in the tax preparation software or on the 2021 Recovery Rebate Credit Worksheet. If filing a joint return, you will include the total amount of the third payment issued to you and your spouse. The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible for the credit.

Q E14. Filing Status Change: My filing status in 2021 is different from that in 2020. Does this affect the amount of the credit I can claim?

(added January 13, 2022) A14. Maybe. When a third Economic Impact Payment was issued jointly to two spouses, each spouse is treated as receiving half the payment. If your filing status for 2021 changed to or from Married Filing Jointly or if you remarried in 2021, each spouse should include their half of the third Economic Impact Payment when entering information into the tax preparation software or completing the worksheet to determine the amount of the 2021 Recovery Rebate Credit.

Now lets throw this monkey wrench into the mix. Couple files MFS in 2020 with one child on the taxpayer's return. He received the form stating he received $2800 and the spouse received the form with $1400. If you move the dependent to the spouses return, does she report $2800 ? Even though the letter states they got $1400 ? Or does the spouse report $1400 and get to claim another $1400 !! I thought I read in this case you add the dependents stimulus amount to whomever claims them. But I cant find it. Cant wait for this stimulus crap to be over !!

[DoubleO]

This is the faq from the IRS on the stimulus concerning 2020 Joint returns now filing MFS. Seems they are allowing it.

Q E11. Joint Economic Impact Payments: What if my spouse and I received a joint third Economic Impact Payment and we are not filing a joint 2021 tax return?

(added January 13, 2022) A11. When third Economic Impact Payments were jointly issued to two spouses, each spouse must claim half the payment when calculating the 2021 Recovery Rebate Credit if they are not filing their 2021 tax return jointly. Each spouse must enter half the payment in the tax preparation software or on the 2021 Recovery Rebate Credit Worksheet. If filing a joint return, you will include the total amount of the third payment issued to you and your spouse. The fastest and most accurate way for you is to file is electronically where the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help determine if you are eligible for the credit.

Q E14. Filing Status Change: My filing status in 2021 is different from that in 2020. Does this affect the amount of the credit I can claim?

(added January 13, 2022) A14. Maybe. When a third Economic Impact Payment was issued jointly to two spouses, each spouse is treated as receiving half the payment. If your filing status for 2021 changed to or from Married Filing Jointly or if you remarried in 2021, each spouse should include their half of the third Economic Impact Payment when entering information into the tax preparation software or completing the worksheet to determine the amount of the 2021 Recovery Rebate Credit.

Now lets throw this monkey wrench into the mix. Couple files MFS in 2020 with one child on the taxpayer's return. He received the form stating he received $2800 and the spouse received the form with $1400. If you move the dependent to the spouses return, does she report $2800 ? Even though the letter states they got $1400 ? Or does the spouse report $1400 and get to claim another $1400 !! I thought I read in this case you add the dependents stimulus amount to whomever claims them. But I cant find it. Cant wait for this stimulus crap to be over !!

If the consensus is that doing it the other way is OK, then it should be OK for spouse to report $1400 and get an extra $1400. After all, all SPOUSE got is $1400. Double dipping is double dipping. I've never been so glad to see EIC and child care receipts this year.

That being said, I have really raised my fees on these MFS returns as the extra calculations and due diligence take up a lot more of my time. Just explaining it to clients who ask, "What would you do?" takes longer than doing the return in most cases. I DON"T CARE. YOU DECIDE. I just get paid more no matter what. And if you have to yell at hubby in background to tell him what I am saying, turn on your speakerphone. Most are concerned with whether it is "legal," as one put it. I did not have many takers last year as the amount was not as much, and many did not want to pay the extra fees for preparation. Didn't get my NEW CAR!! Maybe this year.

[Twin Turbo Z]

If the consensus is that doing it the other way is OK, then it should be OK for spouse to report $1400 and get an extra $1400. After all, all SPOUSE got is $1400. Double dipping is double dipping. I've never been so glad to see EIC and child care receipts this year.

That being said, I have really raised my fees on these MFS returns as the extra calculations and due diligence take up a lot more of my time. Just explaining it to clients who ask, "What would you do?" takes longer than doing the return in most cases. I DON"T CARE. YOU DECIDE. I just get paid more no matter what. And if you have to yell at hubby in background to tell him what I am saying, turn on your speakerphone. Most are concerned with whether it is "legal," as one put it. I did not have many takers last year as the amount was not as much, and many did not want to pay the extra fees for preparation. Didn't get my NEW CAR!! Maybe this year.

Heck yes on the new car !!! We need a new Mini Van !! Good point on the added fees. I can relate to the explaining and the speakerphone !! Its like pulling teeth to get clients who do not have the EIP letter to check and verify through bank records. That and the advanced CTC. Everything has turned in a Circus !!

[DoubleO]

Heck yes on the new car !!! We need a new Mini Van !! Good point on the added fees. I can relate to the explaining and the speakerphone !! Its like pulling teeth to get clients who do not have the EIP letter to check and verify through bank records. That and the advanced CTC. Everything has turned in a Circus !!

I'll let you drive mine if you let me drive yours.