Form 8960 incorrectly pulling Schedule C income to line 4a

[Carrie Houchins-Witt]

I had an e-file rejection, because form 8960 is incorrectly pulling Schedule C income line 4a, and then an adjustment for the entire amount on line 4b.  Obviously this is an error.  Anyone else having this problem, or does Lacerte have a timeframe for solution?

@community_moderator @IntuitEric @IntuitIonN 

[abctax55]

@IntuitGabiU 

I was just able to replicate this situation in a test return.

Can you please look into the issue?  Thanks

[abctax55]

For cross reference.....

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/form-8960-rejection/00/...

Guess we get to lose out on 20% of filing season as they aren't planning on fixing this until mid-February.   Considering how many of my clients are high-income, Schedule C filers I'm not exactly thrilled with Intuit.  And for the issue to be in both ProSeries AND Lacerte... hmmm... wonder about Turboh Tax?

[IRonMaN]

Mid February is a vague timeline.  To some folks, mid February could run from February 2nd to February 27th 😜

[BobKamman]

How is it an obvious error?  It's what the instructions to Form 8960 tell you to do.  If it's an error, it's because the IRS e-file acceptance programmers take their returns to Block since they aren't paid to know anything about taxes.

In researching this I came across something that applies to an earlier discussion of whether you could have passive income on a Schedule C.  According to the 8960 instructions, 

"A passive Schedule C trade or business is any business that you did not materially participate in (for income-producing actions), or any trade that you did not have involvement in on a regular, continuous, and substantial basis (for income-producing actions)."

[Carrie Houchins-Witt]

Thank you - this is not a passive activity.  

[caramturner]

Hi.  There was a change in the instructions for this line from 2021 to 2022.  Please reveiw the instructions, it is correct to pull the Sch. C income to 4a and then back it out.

[abctax55]

Sooooooo   - what's causing the rejections then?  

And why would the IRS do that .... never mind, 'cuz they can...

[Carrie Houchins-Witt]

Thank you for this - you are right.  But it is still rejecting as an e-filing error.  

[fvaughan53]

Yes, I'm having that exact same problem in ProSeries Basic.  

[joantax]

Lacerte told me today that the reject problem on Form 8960 with Schedule C is with the IRS and don't expect a fix until mid-March!!!!!!!  This is unacceptable.

[scheunemanncpa]

As much as we like to bash Lacerte for their problems, this one is on the IRS according to the reject I got on one return.  The return is correct, but can't be filed until the IRS corrects their efile rules.

[JohnTheresa]

Not all my Sch C clients are having the Form 8960 appear.  I have not checked any box regarding participation or passive income.   One was rejected due to the Form 8960 and one without the form was accepted.

What gives?

[abctax55]

@JohnTheresa 

F 8960 only comes into play at certain income levels.  How high is the Sch C income for your clients?

[joantax]

These clients have high incomes and meet the threshold for 8960.  Last year the Schedule C didn't carry to the form but in 2022 it does and this creates the reject.

[Carrie Houchins-Witt]

In my client's case, the Schedule C income is only $1400 but the AGI is $350k.

[abctax55]

Directly from the IRS website that list known efile issues.  It appears the IRS is the problem, not Intuit?

https://www.irs.gov/e-file-providers/known-issues-and-solutions

2/1/2023

Form 8960

Business Rules

Business Rules F8960-019-04 and F8960-003 may cause returns to erroneously reject. These business rules need to be modified to reflect the updates to the Instructions for Form 8960 (Tax Year 2022) regarding the Specific Instructions for Line 4a to include Schedule C (Form 1040) amounts reported on Schedule 1 (Form 1040), line 3 and Form 1041, line 3.

Business Rules F8960-019-04 and F8960-003 will be updated in early PY2023.

Business Rules will be updated sometime in late February to mid-March 2023.

OPEN

[sabatini]

It appears that the IRS has updated their logic.  I had a return with an 8960 rejected last week (due to this issue).  I resubmitted today, and it was accepted.

[Gregkzn]

That is great news. Did you change anything or just resubmit the return?

[sabatini]

No changes, just resubmitted.

[SUNNYCA]

HI,

I use Lacerte and had a reject Saturday. Just re-e-filed and it went through.