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Are you sure neither parent qualifies for HOH? Just because the kids "claimed" themselves, it doesn't mean that they should have. If either kid is full time student under age 24 and did not provide over 1/2 of their own support, HOH, education credits and even EIC may come into play.

Here is an in depth analysis of all the states ( almost 20 states now ) that have passed a PTE Tax: https://www.bdo.com/insights/tax/state-and-local-tax/five-more-states-enact-pte-tax-elections#:~:text=On July 19%2C 2021%2C Oregon enacted S.B.&text=An eligible PTE%2C which is,through business alternative income tax.”

If stimulus payments are based on a joint return, the IRS considers each spouse to have received half the amount, so I think they would expect her to report receiving $1,450 on the RRC worksheet. If she claims the incorrect amount of Recovery Rebate Credit as a result, they will consider it a math error and correct it, but this will delay the refund.

Gosh, Oh golly, you mean the IRS made a mistake. What is this world coming to? The clients would be best advised to put the money in a separate bank account, because sometime within the next 3 years they may receive a letter from the IRS. "Dear Taxpayer, In August of2021 we sent you a refund check for $3000.00. We are sorry to inform you that the person who calculated your refund was suffering from apoxia due to prolonged mask wearing. Said person made an error in determining your refund, which we have found in its totality to be unwarranted. Please accept our sincere apologize for this, but we demand that the $3000.00. plus interest of $27.33 be returned to us within 15 days, or interest will continue to accrue. Furthermore, failure to pay could subject you to collection action including levying your bank account and garnishing your wages. Joe Potatohead, Supervisor of Dumbbells"

Late in the tax season, the IRS agreed that in community property states, the income from UI was community income, therefore both spouses can claim the $10,200 exemption from income, even if only one received UI, provided they meet the other qualifications. It was iffy for a while if the IRS would agree, but eventually (like in late May) they did. So if your Married CA client had more than $20,400 in UI, and you only excluded $10,200, the IRS just corrected the return and gave your clients their refund. Tom Sparks, NV