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I am using Turbo Tax to file my taxes for 2020. In Turbo Tax it asked if I received stimulus payments and how many. I received one payment in May 2020 and one payment in January 2021. I entered both payments in Turbo Tax and suddenly my tax owed jump $3000.

Any ideas why is that?

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The stimulus payment was a tax credit paid to you in advance. The amount you received in stimulus payments has a direct 1:1 relationship with your tax liability. Assuming you are eligible for the tax credit, if you had not been paid the stimulus, your tax liability would go down by the amount you should have been paid, but weren’t.

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  • In other words, Turbo Tax assumes that you did not get the stimulus at first. Once the OP said that they got $3,000 cumulative from the stimulus payments, the tax owed goes up 1:1 (unless there are other un-filled deductions/credits).
    – Nosjack
    Jan 29, 2021 at 13:13
  • @Nosjack I don’t use TurboTax, so I don’t know the timing of when in the interview it decides whether or not to include the credit in its tax bill estimate. But regardless, if you do your taxes telling it you got $0 stimulus, and you do your taxes again telling it you got $3000 stimulus, the difference between the two runs would be $3000.
    – Ben Miller
    Jan 29, 2021 at 13:21
  • I received 2 stimulus checks totaling around $5000. Right at the end Turbo Tax asks to enter both checks. When I write it then I owe more in taxes. I thought they are not going to tax the stump checks. I am in USA
    – azamsharp
    Jan 29, 2021 at 14:26
  • @azamsharp You are not taxed on the stimulus checks. You (and most taxpayers) get a tax credit (tax reduction) for 2020. The stimulus payment gave you that money early, so you didn’t have to wait for your tax refund in 2021 to receive it. If you hadn’t gotten the payment then, it would be used now to reduce your tax payment (or increase your refund).
    – Ben Miller
    Jan 29, 2021 at 14:42
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    @azamsharp Imagine that you never received the stimulus money. You would have a certain tax bill, which you see in TurboTax before you enter the stimulus payment. Now imagine that the government gave you money last year that you need to pay back this year. That is essentially what you are seeing.
    – Ben Miller
    Jan 29, 2021 at 15:10

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