My tax return e-file has been rejected twice by the IRS. Both have to do with adjusments to Mortgage Interest and Property Tax duduction.
Here is the situation:
I rent a room in my house to a company. They pay me rent and they issue me a 1099-MISC. I claim that on Schedule E and a portion (pro-rated) of property taxes and mortgage interest as an expense against that rent. I then show these two deductions as an adjustment on Schedule A (I still get a better deduction versus the standard deduction) by showing them as negative amounts in the columns for mortgage interest and property taxes. The IRS doesn't like that and I am surprised Turbo Tax lets it happen without flagging it as an error. So apparently TT doesn't know about the IRS rules in this case or I guess I can just ignore the adjustment and double dip on the expense. The only alternative would be to make the adjustments and take the correct deduction on Schedule A and file via mail instead of e-filing. If anyone knows a work around let me know.
