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I haven't filed 2020 taxes yet. On my last return (2019) my adult daughter was on my return as a dependent. When I file 2020, I will not put her on my return as a dependent, because she finished college in 2019.

I had her file her 2020 return early this year so she would be sure to get a stimulus check in case they did another one (I assumed they would exclude adult dependents as they had with previous stimulus payments). Today, she got the $1,400 deposited to her account by the Treasury. However, I was surprised to see $4,200 deposited to my account, when I expected only $2,800 (for me and my wife). They paid for my daughter twice, $1,400 to her (based on her 2020 return) and $1,400 to me (based on my 2019 return that showed her as a dependent). They have the social security numbers, so I assumed the IRS and Treasury would have figured this out.

I have searched and searched, but am unsure whether this overpayment will be clawed back or not. I can't even find a mechanism for returning it (and getting credit for doing that if they later do say I owe it to them). I've read if your 2019 income made you eligible, but your 2020 income (if you file after the stimulus) would have made you ineligible, they won't claw back the stimulus they sent. Stimulus money for people that died between the tax return and the stimulus disbursement does have to be returned to the treasury.

I can't find guidance for our situation. There must be a fair number of people with college kids that have the same scenario.

This question 3rd stimulus check when 2020 dependents differ from 2019 seems at first to ask the same thing, but it doesn't include the key point of overpayment by the Treasury.

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  • I am in the same situation. Trying to figure out how to handle it. – Eric Burdo Mar 17 at 14:27
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Each person's stimulus payment and amount are determined independently according to that taxpayer's tax situation and the rules in the law. Different people's stimulus amounts are not connected. From what I can tell, the stimulus amounts received by both of you are correct according to your tax situations and the law, and therefore nothing needs to be, or should be, "returned".

We can look at the text of the law for the third stimulus payment. (The conclusions will be similar for the first two stimulus payments, as the relevant text is similar.) The text of the American Rescue Plan Act is here. Section 9601 adds 26 USC 6428B which provides the third stimulus tax credit and advance refund. Subsections (a-e) provide for a tax credit for the 2021 tax year, and sets out eligibility for the tax credit based on various factors, including who are eligible individuals, income limits, money for dependents, SSN requirement, etc., from the 2021 tax year.

Subsection (g) provides for the "advance refunds" (the "check" or debit card) to be sent to people in early 2021. Subsections (g)(1) and (g)(2)(A) provide that the eligibility and amount of the payment would be based on the eligibility and amount of payment of the tax credit (described in subsections (a-e)) if it had applied to the 2019 tax year:

(g) Advance refunds and credits.—

(1) IN GENERAL.—Subject to paragraphs (5) and (6), each individual who was an eligible individual for such individual’s first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.

(2) ADVANCE REFUND AMOUNT.—

(A) IN GENERAL.—For purposes of paragraph (1), the advance refund amount is the amount that would have been allowed as a credit under this section for such taxable year if this section (other than subsection (f) and this subsection) had applied to such taxable year.

Subsection (g)(5)(A) substitutes 2020 for 2019 for people who have already filed their 2020 tax returns by the initial payment determination date:

(A) APPLICATION TO 2020 RETURNS FILED AT TIME OF INITIAL DETERMINATION.—If, at the time of any determination made pursuant to paragraph (3), the individual referred to in paragraph (1) has filed a return of tax for the individual’s first taxable year beginning in 2020, paragraph (1) shall be applied with respect to such individual by substituting ‘2020’ for ‘2019’.

Since you have not filed your 2020 tax return by the initial payment determination date, the "rightful amount" of advance payment you should receive, according to the law, is the amount of the tax credit if it had applied to your 2019 tax year, and that amount is $4,200, because you jointly filed in your 2019 tax year, and claimed one dependent in your 2019 tax year.

And since your daughter had filed her 2020 tax return by the initial payment determination date, the "rightful amount" of advance payment she should receive, according to the law, is the amount of the tax credit if it had applied to her 2020 tax year, and that amount is $1,400, because she filed as single and could not be claimed by anyone as a dependent in the 2020 tax year. (And in fact, even if she had not filed her 2020 tax return by the initial payment determination date, and thus received no stimulus payment initially since she could be claimed as a dependent for 2019, subsection (g)(5)(B) provides her an additional payment if she files her 2020 tax return by the "additional payment determination date" (90 days after the 2020 tax filing deadline), and the tax credit as applied to her 2020 tax year is more than she received -- which it is -- and she would receive $1,400 at that time.)

Nothing in the law provides that someone who received an additional amount for claiming a dependent will reduce the payment to the dependent (whose payment was determined under a different tax year), or vice versa. Nothing in the law provides that two people who claimed the same dependent in different tax years cannot both receive the additional amount for the dependent, if their payment happened to be determined based on the respective years that they claimed the dependent. Because people sometimes informally say that they "got the stimulus payment" of their dependent, you may have gotten a misconception that each person has (at most) one fixed amount of stimulus money that is gotten by only one person or another, but that's not how the payment amounts are constructed in the text of the law. In the law, the payment amount for a particular taxpayer are determined solely by that taxpayer's situation, with no reference to the payment amounts of another taxpayer.

There is nothing erroneous about either of those two amounts, and in fact, I don't even think that the IRS has the discretionary power to change the amount of the payment just because they think "someone already got the stimulus for this person", because how the amount is determined is set in the law.

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There is a procedure for returning a stimulus payment. However, it is unclear exactly when it is required to return it and when it is not required.

It seems logical to me (although tax regulations do not always follow logic) that if the stimulus payment was paid because of your own error, you would probably be well-advised to return it (Example 1, Example 2).

It is also clear that if the IRS gives you a stimulus check based on your 2019 tax situation, and you qualify for a smaller amount based on your 2020 status, you do not need to return the excess.

In this case, your daughter filed her 2020 tax return and got the third round of stimulus based on her latest return. That sounds right. You also got a stimulus payment based on your latest return. You did nothing wrong, as far as I can tell. It seems to me that the IRS could have checked whether they had given one of your 2019 dependents a stimulus payment before sending you your full amount, but they apparently didn’t do that.

If I was you, I would probably keep the money and not try to return it. But if the IRS came to me later and asked for it back, I would give it back without an argument.

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