Expecting a refund, but got a tax bill letter

[rebelman1]

Hi Turbo Tax Folks, 

I used the Turbo Tax 2019 business and real estate version to file my 2019 tax return. All looked good and the system took me through all of my tax return. I filed online in early February.

I was looking for my tax refund from the Earned Income Credit. Instead, the IRS sent me a tax bill letter saying that- "We didn't allow the amount claimed as Earned Income Credit on your tax return because your investment income was more than the amount for this credit."

My investment income was $17. The threshold amount for investment income is $3,600. So I was clearly under this $3,600 limit. 

So I called the IRS tax rep today. After a long hold wait time, I spoke to a competent and caring tax rep. She looked at my return and told me that the reason for my tax bill instead of a tax refund was that according to line 7a (Other income from Schedule 1, line 9) was too high. 

My income from Other income from Schedule 1, line 9 was 95% on my income. But 80% of that was from my Schedule C business. 

The bottom line is that I had a total of $17 investment income for 2019. And thus, I was clearly due the Earned Income Credit tax refund.  

Has anyone else suffered this problem and how did you correct it so that you could receive your  Earned Income Credit refund? 

Thanks, William

[DawnC]

What was your Schedule C income and what kind of work did you do to generate the income?   It sounds like they have taken the position that a portion (in excess of $3600) of your business income that you reported on your Schedule C is actually personal investment income.  But that is just a guess.   

[rebelman1]

Thanks for your reply, Dawn, 

I called and spoke to an IRS rep. She walked me through my tax return. She added up all my investment income and it was $3 over the $3,600 limit. 

However, we found some accounting mistakes in my home rental income and expense totals. I'll simply file an amended return to solve the tax bill/refund problem. 

Thanks! William

BTW- Please ask your TurboTax software folks to make a feature that adds all of the investment income sources and provide a total $ # on it so that a user can see how close they are to the $3,600 cap. Make sense? 

Thanks, Dawn!