Efile Reject - Schedule C passive loss

[tbolton]

This year has been one thing after another......

I have two clients - efiles rejected because Schedule C - has the box Did not "materially participate" checked.   PAL on the form - so no losses deducted.    Nothing new - these two have had this for the last several years.   No home office tied to either one.   Both passive and carrying forward.   It wants me to uncheck the box - another nothing else is overridden.   Then it will declare the loss on the return.   It needs to carry forward.  

Is this a bug - neither wants to paper file.   There is nothing unusual about this from any other year.  PLEASE HELP!!   I can not spend another day on the phone with lacerte support person that doesn't know what end is up.....   From what I find on the error code - this is every indication that it's another bug in the program.   

FEDERAL Filing Rejected - This filing was rejected by the taxing agency on April 05, 2026. You need to fix errors that caused the rejection before it can be accepted by the agency. Follow these instructions for fixing the errors and you can transmit again at no additional charge.
Reject: Error SC-F1040-023-01: Each 'NetProfitOrLossAmt' in Form 1040 Schedule C, must be equal to 'TentativeProfitOrLossAmt' minus (-) 'HomeBusinessExpenseAmt'.

Form: 0(00)
Field: -31694(/efile:Return/efile:ReturnData/efile:IRS1040ScheduleC/efile:TentativeProfitOrLossAmt)
Occurrence: 00000(0001)

Resolution: The "Deductible gain (loss) (-1=none) [O]" override field in the Schedule C input cannot be used for efiled returns. If the affected business activity is computing a loss, and the loss is subject to the passive activity loss limitations, check the box for "Did not 'materially participate." If the business is subject to the at risk loss limitations, use the field "Amount at risk (blank=all).

Please remove any override fields in the Schedule C input, and retransmit the filing.

This filing was postmarked by the transmitter April 05, 2026 12:32 PM PST.

(ref. #0)
CALIFORNIA Filing Rejected - This filing was rejected by the taxing agency on April 05, 2026. You need to fix errors that caused the rejection before it can be accepted by the agency. Follow these instructions for fixing the errors and you can transmit again at no additional charge.
Reject: Error REJ001: This state filing was rejected because the federal taxing authority has not yet accepted or has rejected the federal filing.

Form: 0(00)
Field: (0000)
Occurrence: 00000(0000)

Resolution: Correct the errors in the federal filing and then re-file these returns for E-File after the federal filing is accepted.

This filing was postmarked by the transmitter April 05, 2026 12:32 PM PST.

(ref. #0)

[Kathi_at_Intuit]

Hi @tbolton great to see you in the Community and thanks for posting about the e-file rejection for Sch C passive losses. This has been reported to developemt for review and updates will be provided to you via email. 

[tbolton]

Hi Kathi_at_Intuit, 

Since April 15th is fast approaching - any chance you can provide an update to this?  I know if I call and ask about it, no one will know what I'm talking about 🙂

Thanks!

[Kathi_at_Intuit]

Hi @tbolton Thanks for reaching out. We checked on this and there isn’t an ETA available at this time. However, we do see that an email update is tentatively scheduled to go out today. 

[tbolton]

Great - that leaves me in a pickle.  Now have to go back to one of my clients and tell them they need to mail in their return.   Tacky.  Thanks for you help.   

Unclear what all the problems have been with intuit this year - the delay in software release was the worst.   As everyone of us keeps saying - we pay ALOT of money for this.  

I am not happy and keep saying going to switch every year.   But you may just push me into retirement sooner rather then later 🙂

[Kathi_at_Intuit]

Hi @tbolton We hear you and understand how frustrating this is, especially this close to the deadline. We know this puts you in a difficult position with your clients, and that is not the experience we want for you. 

At this time, there is still no ETA to share, but we will continue to monitor for updates and post as soon as more information becomes available. We do appreciate you sharing your feedback and we will give this to the appropraite teams.

[rdellorusso]

has there been any update to this?

[tbolton]

No and there does not seem to be any sense of urgency over it either.  I did get an email saying would get another update in a couple of weeks.  Both of my rejected returns have been extended.  And I have one VERY unhappy client.   

[DeveraC]

Do we have an update on this? I tried to file my personal return today and I'm getting this error message still. It is 11:15 at night and there's no post office near me that I can get it postmarked. 

[tbolton]

There is none from the Lacerte side still.   All you can do is extend your return.

We are at Lacerte’s mercy until they fix it or give an update.   

[tbolton]

Notification received just now 4/16/2026 today's update has fixed this bug.   

And hallelujah the federal one has been accepted!

[Kathi_at_Intuit]

HI @tbolton and @rdellorusso we wanted to let you know that today's update includes the fix for this rejection. 

[DeveraC]

This wasn't fixed in ProSeries. 

[IntuitKate]

Hi @DeveraC  Please make sure that you are using the most updated version of ProSeries. If you have updated and are still experiencing this issue, please connect with ProSeries Support so we can take a closer look.