Did TurboTax Mis-calculate My Recovery Rebate Credit?

It never makes me feel good when receiving a letter from the IRS because most of the time, it’s not going to be a good news (luckily I haven’t got into any trouble with the IRS so far). So when I saw the letter from IRS in my mailbox today, I was first kind of a little nervous when opening up the envelop, then a little relieved once I finished with the letter.

The letter was a notice to let us know that we now owe the IRS $485.07 because

We changed the amount of the recovery rebate credit you claimed on Line 70 of your Form 1040 because the amount entered was computed incorrectly.

While it isn’t as bad as an audit letter, it still made me feel that I didn’t something wrong with our tax return, whether it’s my fault or not. So I went back to our 2008 tax form and found on Line 70 “Recovery rebate credit“, the amount entered was $483. The problem is I didn’t enter that amount myself. It was TurboTax, the tax software I used to prepare our tax returns, which determined the amount of rebate credit we should get for us :( What is more frustrating is that I can’t seem to figure out how $483 is calculated even after going through related worksheets. Actually, the only information I can find that’s related to the recovery rebate credit in the return was on the Federal Information Worksheet, which has the following two lines under Recovery Rebate Credit Information:

  • Estimated economic stimulus rebate calculated on your 2007 TurboTax return: $384;
  • Economic stimulus payment received (before offset): $201;

The difference of $183 between the actual amount of economic stimulus payemnt we received and the amount TurboTax calculated is the penalty for not paying enough estimated taxes in 2007. Maybe I made a mistake about “before offset”, but somehow the numbers just don’t add up: How exactly is the $483 credit calculated anyway?

What should I do next? Pay the amount we are told we owe? Or disput the correction?

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15 Responses to “Did TurboTax Mis-calculate My Recovery Rebate Credit?”

  1. tom |  Jun 18, 2009 at 7:54 am

    Probably want to give TurboTax a call. Tell them the situation and make them explain the “math” behind their numbers.

  2. Bob Meighan |  Jun 19, 2009 at 11:57 am

    Sounds like you did not enter the correct rebate amount from 2007 (the amount before any offsets). Any rebate calculated on your 2008 return is simply the amount you were entitled to in either 2007 or 2008 reduced by the credit received. Without knowing your specific situation, it’s very difficult to tell you what you should have been entitled to claim. However, generally it would have been $600 (single) or $1200 (joint) plus $300 for each child.

    Just so you know, with over 30 million returns filed for 2007 and 2008, we are not aware of any calculation issue in this area. I would suggest you contact the IRS first to determine how they arrived at their number.

    I hope this information helps.

    Bob Meighan
    VP, TurboTax

  3. Jennifer |  Jun 20, 2009 at 11:48 am

    I, too, received a letter from the IRS stating an miscalcuation with the recovery rebate credit stating that we owe $1200. I think it was a computing error with TurboTax. I don’t think that this is coincidnce. I believe that TurboTax has an error in their software. I will be sharing this experience with all my acquitances to ensure that they never use TurboTax!

  4. former accounting student |  Jun 24, 2009 at 8:13 pm

    i got one too…..

    also seems to me that the error
    is with the addition/subtraction
    on the worksheet in the software….

    pay up…

    BOO HISSSSS

  5. Jeff |  Jun 26, 2009 at 8:55 am

    I recieved the same letter yesterday. I called the IRS about 10 mins ago and it was explained to me. My $600 was offset due to some taxes owed prior. Not having remembered recieving the stimulus I entered zereo and subsequently screwed myself. IRS wants $398 plus $202 in penalties. So I guess I’ll just pay it and let them be. This in my opinion was my fault and not Turbo Tax.

  6. Bob Meighan |  Jun 26, 2009 at 11:29 am

    Jeff… I would suggest you send a letter to the IRS requesting abatement of the penalty. They are generally pretty good about eliminating the penalty when it’s for a reasonable cause. Use language like “I respectfully request abatement of the penalty because… ”

    Others… I can confidently say there is not a calculation error with the rebate. I encourage you to call the IRS to find out how they arrived at their number and then compare it what you may have entered. In every case that I’ve seen, it’s been a case where the user entered the incorrect rebate received from the prior year.

    I hope this information helps.

    Bob Meighan
    VP, TurboTax

  7. Stuart |  Jul 07, 2009 at 8:31 am

    I’m getting ready to pay the IRS $1200 for Turbo Tax’s miscalculation of the rebate. I found the error – and I put the blame on Turbo Tax.

    On the recovery rebate credit worksheet, lines 1 and 2 are filled in correctly. Line 3 is left blank (asking if my wife and I are filing jointly) is blank. Hmmmm. Had it been filled in correctly, it would go to line 4 to ask if either of us were members of the armed forces – and that’s a “no”. With a “no”, things should have stopped there. But, Turbo Tax went on to calculate my rebate, which I should not get per the form (incorrectly filled out by Turbo Tax).

    So, I’m paying the amount I owe – plus penalties (thank you Turbo Tax).

    Don’t listen to VP Bob Meighan. He’s as wrong as the software he’s trying to defend.

    As for me, I’m going back to doing taxes by hand.

    This is the 2nd time Turbo Tax misled me.

    Stuart

    PS – Bob, if you can explain this – and be specific – we’d like to know what happened.

  8. Stuart |  Jul 07, 2009 at 8:05 pm

    I’m getting ready to pay the IRS $1200 for Turbo Tax’s miscalculation of the rebate. I found the error – and I put the blame on Turbo Tax.

    On the recovery rebate credit worksheet, lines 1 and 2 are filled in correctly. Line 3 is left blank (asking if my wife and I are filing jointly). Hmmmm. Had it been filled in correctly, it would go to line 4 to ask if either of us were members of the armed forces – and that’s a “no”. With a “no”, things should have stopped there. But, Turbo Tax went on to calculate my rebate, which I should not get per the form (incorrectly filled out by Turbo Tax).

    So, I’m paying the amount I owe – plus penalties (thank you Turbo Tax).

    As for me, I’m going back to doing taxes by hand.

    This is the 2nd time Turbo Tax misled me.

    Stuart

  9. Stuart |  Jul 07, 2009 at 9:06 pm

    Never mind my last post.

    The error was mine.

    If you got your stimulus check last year, you don’t get one this year.

    If you did not state how much you got last year, you “double-dipped” the stimulus.

    So, those nasty letters from the IRS are just telling you that you need to correct the error.

    If you are not sure how much you got back last year, go to

    https://sa1.www4.irs.gov/irfof/IRServlet?app=IRACTC&selectLanguage=en

    Use the amount they show you & enter it on line 28 of the Turbotax Recovery Rebate Credit Worksheet. On line 29, you calc the difference between line 28 and 27. If it’s 0, then you don’t get the rebate again.

    Stuart

  10. Bob Meighan |  Jul 08, 2009 at 9:07 am

    Stuart… I appreciate the integrity you demonstrated by mentioning that the fault was with you.

    Others… In just about every case I’ve seen, the user does not enter the correct rebate they received the prior year (from their 2007 tax return). If you don’t put the correct amount in for the prior year (without regard to any offsets the IRS may have made), your rebate computed for tax year 2008 will be incorrect. That’s because if you didn’t get the full amount of the rebate in the prior year, you’ll get the balance on your 2008 tax return. Going back to my earlier post, we have not identified a single case of TurboTax incorrectly computing the rebate. It just so happens, unfortunately, that the rebate was one of the biggest issues for the IRS this past tax filing season. It’s causing headaches for everyone.

    Bob Meighan
    VP, TurboTax

  11. angela |  Oct 03, 2009 at 10:50 am

    Bob,

    My husband received the same letter. When I went back to look at the worksheet for Rebate recovery, we should have never even received one. Based on the question, which number 4 asks if we were in the army forces and the answer is no, at that point it should stop. I do not recall the interview asking that question, however , if it did that is easy answer, no. where can I find the prompts that feeds the recovery rebate credit worksheet. Now we owe an additional $600.

  12. Dennis |  Apr 10, 2010 at 4:30 pm

    Exact same problem; plus TurboTax emailed me confirmation that my e-return has been successfully received when in fact it hadn’t. Now I may owe the IRS a bundle in penalties. Would be VERY happy to find something else to use. The VP said there is no error in math; but sure seems like significant problems in usability.

    • Bob Meighan |  Apr 10, 2010 at 11:57 pm

      Dennis… I believe your issue is different. The other posts deal with the recovery rebate (which was for tax year 2008). As for your efile issue, we will send you an email acknowledgment when it is transmitted to us. You will then receive an email acknowledgment from us when the IRS accepts or rejects your return. Make sure you check back to ensure your return is acknowledged by the IRS (that is not done by us). Not sure what math issue you’re talking about.

      Bob Meighan
      VP, TurboTax

  13. Kristi |  Sep 05, 2010 at 12:39 pm

    Turbo Tax is probably fine. Questions 3 and 4 are supposed to be blank (skipped) if you answer yes to question 2.

    2. Does your tax return include a valid social security number for you and, if filing a joint return, your
    spouse?
    Yes. Skip lines 3 and 4 and go to line 5.

    I have the same problem. But I am thinking it is more along the lines of not putting in the correct rebate amount to begin with.