Client received letter stating they qualify for additional child tax credit, proseries not calculating. Negative income because of K-1's earned income of 201000.00.

[pat1]

Client received letter from IRS stating they should file 8812.  Proseries not calculating 8812

[itonewbie]

What do you mean "Negative income because of K-1's earned income of 201000.00"?

Did you check the diagnostic and follow the money to check why the form was not prepared?  If you find something in PS you don't agree with or are not clear on, please come back with the relevant info.

[pat1]

I only have so many words I could type in.  They have w-2 income of 201,000. but losses on numerous K-1's offset that income so it is a total negative income on the 1040.  They got a letter from the IRS stating that they should file for the Additional child tax credit,.  If the 8812 uses the w-2 income they would qualify,. But proseries does not use the w-2 income just the overall loss.

[TaxGuyBill]

"numerous K-1's"

Are these Partnerships (1065) or S-corporations (1120-S)?  Is the loss in Box 1?  Box 14 with Code "A"?
Have you confirmed that you entered them as the correct K-1 in the software (such as a Partnership 1065 versus a S-corporation 1120-S)?

[itonewbie · Accepted solution]

I'm in agreement with Bill.  If there is a net loss in earnings from self-employment (which losses from 1120-S are not), that would be netted against compensation from the W-2, which is in line with the definition of Earned Income under §32 to which §24 refers.  In that case, ProSeries would be correct in not computing any refundable CTC on F.8812 assuming the sum of the W-2 wages and net earnings from self-employment is less than $0.

Over $200,000 in losses from K-1s is a hefty sum.  Have you already considered basis and at-risk limitations?  The system may allow the losses if you mark those as being non-passive but there should be a diagnostic that prompts you to review those limitations.