Form 8829 Simplified Method Line A Gross income limitation is pulling from line 28 Total Expenses on Schedule C and should be from line 29 Tentative Profit or (loss)?

The percent of business use of the home office is missing from the calculation and therefore the result is that the calculation shows a loss for your business.

 

When you go through the Federal Review of your return, this error will be flagged and you can enter the amount on that review screen.  The amount to enter is the percentage of time that you spend in your home office making money for your business.  If all of your time is spent working in your home office for your business, then enter 100%.

 

You can also make the correction to the calculation using Forms Mode.  Use these steps:

 

• Click Forms on the top row of TurboTax.
• Go to Form 8829.
• Scroll to the section titled Line 8 Calculation Smart Worksheet and enter your percent of business use of the home office on line B.
• Click Step-by-Step at the top of the screen to go back to the input screens.

 

@AnnetteB6 I don't think that is the case.

 

Sch C

Line 28 Total Expenses = $14,655

Line 29 Tentative Profit or (loss) $46,345

 

Form 8829

Part I

1. Area used regularly = 300

2. Total area of home = 2,456

 

Simplified Method Smart Worksheet (with NO % in Line 8 Calculation Smart Worksheet

A Gross Income limitation = ($14,655)

 

It turns out you're not getting the home office deduction

That's because the net profit for your business was zero or less, which means you can't get the home office deduction.

 

Fed Review gives no error.

 

Simplified Method Smart Worksheet (with 12.21% in Line 8 Calculation Smart Worksheet)

A Gross Income limitation = ($7,207)  Not even sure where this negative number came from

 

Why is Line 8 Calculation Smart Worksheet - A Gross Income limitation - negative?  Without a percent in Line 8 Calculation Smart Worksheet, it is pulling Sch C line 28 which is Total Expenses instead of Line 29 Tentative profit or (loss) $46,345

If 12.21% of use for the home office is correct for your situation, take a look at the information below to learn how the home office limitation is calculated.  It is possible that due to your particular situation, you are not allowed to claim the simplified home office deduction.

 

For any home office deduction (actual expenses or simplified), the home office deduction is not allowed to take a Schedule C bottom line from a positive profit to a loss.  Therefore, before the home office deduction is calculated, the tentative profit or loss of the business is considered.  If the number is a loss, then no simplified home office deduction is allowed.  However, even with a loss, an actual expense home office deduction can be calculated and carried over to the next year.  Carryover is only possible when using the actual expenses, not the simplified method.  

 

The profit/loss number that is used to decide whether the home office expense is allowed comes from Schedule C line 7 minus Schedule C line 28.  If the result is positive, then that is the first step to get the simplified home office deduction.  

 

However, the Business Conducted in the Home Office comes into play too.  If that number is not entered, then it is assumed to be zero.  Zero times the income on Schedule C line 7 minus Schedule C line 28 gives a negative number, which means no home office deduction in the current year (carryover if using actual expense method).  

 

If the Business Conducted in the Home Office percentage is any number less than 100%, then the amount on Schedule C line 7 is adjusted by that percentage before the expenses are subtracted.  So even with what you expect to be a positive profit situation, the percentage of business conducted in the home office can drop the income to a level where the profit is negative instead of positive.  This means that the simplified home office method is not allowed.  Again, using the actual expense method can work, but the home office expense is carried over to a future year.  

 

@angelv17 

I have the same issue as @angelv17 where my income is definitely positive and I use my office 100% of the time so nothing is reduced there.  It is pulling my expenses NOT my profit from Line 29.  It is NOT flagged as an issue in federal review

 

When will this be resolved? How can I override it?  

@AnnetteB6 

Maybe I am not clearly understanding what Form 8829 Line 8 Calculation Smart Worksheet B is asking for.  Is it not the calculation of the 300 sq ft allowed divided by 2,456 total home sq ft = 12.21%?

 

Sch C Line 7 Gross Income = $61,000

@tigr_ldy Did you go to Form 8829 Line 8 Calculation Smart Worksheet B and manually enter 100%?

 

Try that and see if it works for you.

 

Angel

That worked. Thanks..but shouldn't be required for a paid software!