A federal return was rejected due to processing error on Form 8960. Net Income from Schedule C went to Line 4a as Rental Real Estate. How can I correct this and refile?

[George4Tacks]

in Business Income Scroll down and find Subject to net investment income tax 1=yes, 2=no and enter a 2

That should then add a negative Sch C to line 4b

[jesusmac2000]

The program already did this - the Business income is on line 4a and then as a negative on Line 4B.

I don't know where you mean "In Business Income" - where is this? On Form 8960 or on Schedule C?

I did not find it in either place.  The calculation was correct and yet the return was rejected.

Is this a program error which will be corrected so I can refile the return?

[George4Tacks]

Did you read the instructions for line 4a? 

Line 4a—Income From Passive Trades/Businesses, Rental Real Estate, Royalties, Partnerships, S Corporations, and Trusts

Enter the following amount from your properly completed return.

• Schedule 1 (Form 1040), line 3.

• Schedule 1 (Form 1040), line 5.

• Form 1041, line 3.

• Form 1041, line 5.

• Form 1041-QFT, the portion of line 4 that’s income and loss that properly would be reported by a trust filing Form 1041 on Form 1041, line 5.

• Form 1040-NR, the amount properly reported on the attachment to your Form 1040-NR representing the amount that you would properly include on Schedule 1 (Form 1040), line 5, if you were filing Form 1040 or 1040‐SR and including income and loss only for your period of U.S. residency.

[George4Tacks]

Here is the input I mentioned. I do not know if that is the reason for reject.

[jesusmac2000]

I use ProSeries Basic...I do not have those drop down menus.

The Form has the right numbers on the right lines...and yet it was rejected.  I am going to call ProSeries. This is their problem...I was checking to see if anyone else has experienced this error.  Did not find any other comments.  It is a simple Schedule C with only income from a 1099NEC - no expenses.  It is not a passive activity.  

Thanks for your comments and help!

[lee1]

Please post what you find. I'm using Proseries Pro and having the same issue. 

[zanster]

Me too.. same problem.. My Sched C income is flowing onto the 8960 Line 4a Rental or Partnership Income.. I did check the box on Sched C input to mark NOT SUBJECT TO NII tax, yet it is still carrying to that line. 

looks like a problem with Proconnect.  

[zanster]

I have the same problem and this did not fix it. I=THe Sched C income is still carrying to Form 8960. Software error. Can Ituit Please fix ..

[George4Tacks]

When all else fails - READ THE INSTRUCTIONS

https://www.irs.gov/instructions/i8960#en_US_2022_publink100012437

Note.

Income reported on Schedule 1 (Form 1040), line 3, and Schedule 1 (Form 1040), line 5, include both passive and nonpassive income, and are added to line 4a of Form 8960. Nonpassive income included on Schedule C (Form 1040) and Schedule E (Form 1040), Supplemental Income and Loss, is removed (as a negative) on line 4b, so that only passive income from Schedule C (Form 1040), and Schedule E (Form 1040) remain on line 4c.

 

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).

There are two kinds of passive activities.

• Trade or business activities in which you don’t materially participate during the year.

• Rental activities, even if you do materially participate in them, unless you’re a real estate professional.