2020 Return Challenge EIC

From your question, I could not understand why the IRS adjusted  your refund. You can call TurboTax support to get help in understanding the IRS notice and the adjustment. They can also help you with amending the tax return if necessary.

According to the rules, for 2020, you were allowed to use your 2019 or 2020 earned income in calculating the EIC,  depending on which one gave you the highest credit.  

Please refer to the link below for additional information on the Earned Income Credit (EIC).

https://turbotax.intuit.com/tax-tips/tax-deductions-and-credits/earned-income-credit/L4lmLBNWa

The lookback rule is part of the Coronavirus tax relief package.

The special lookback rule allowed lower income individuals to use their earned income from 2019 to determine their Earned Income Tax Credit and the refundable portion of the Child Tax Credit in 2020, since their lower 2020 income could reduce the amount they are eligible for.

You would allow the lookback rule as a higher earned income from 2019 would result in a higher 2020 Earned Income Credit since your 2020 income was lower.

I understand your 2020 tax refund was adjusted by the IRS.  There could be other items that were changed on your tax return , affecting your 2020 tax refund.

You can look at your IRS account, and a Record of Account transcript.  This type of transcript will reflect your filed return and any changes made by the IRS.  Once you have the Record of Account transcript, compare the Earned Income Credit on your filed return, with the IRS corrected Earned Income Credit.  The Earned Income Credit should have increased using a higher 2019 earned income. 

If your 2019 earned income was too high for the 2020 Earned Income Credit, you did not have to apply the lookback rule.

Sign in to your IRS account, request a Record of Account transcript.

https://www.irs.gov/payments/your-online-account

The income limits for the 2020 Earned Income Credit

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-and-earned-income-tax-credit-eitc-tables#EITC%20Tables

I hope you find this helpful!

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@Lisabyrn wrote:

1). How do I tell TurboTax that the IRS reduced my refund

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You don't have to tell TurboTax that the IRS reduced your refund. It doesn't matter.

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@Lisabyrn wrote:

2) how can I refile/amend 2020 return so that the IRS does not look to 2019 income?

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Did the IRS reduce your EIC or did they eliminate it completely? You said "The IRS adjusted my return reducing the EIC amount." You also said "I don't qualify [for EIC] based on 2019." If you would not qualify for EIC at all based on your 2019 income, but the IRS did not completely eliminate your EIC, that means that they did not use your 2019 income, which would make sense. They looked at it, and saw that using your 2019 income would not benefit you, so they did not use it. They did not apply the lookback rule. They recalculated your EIC, still using your 2020 income. You have not given enough information for us to know why they reduced your EIC. They must have changed something else on your tax return besides the EIC. But if the IRS did not actually use your 2019 income, there is no reason to file an amended return.