Hi, for the category of 'Other/Any Miscellaneous Expenses' under Business Income and Expenses, there seems to be a bug. When I enter the Miscellaneous Expense number, it decreases my refund. This is considered an expense, so I am confused as to why it is subtracted from my refund amount. Would someone explain to me why this is the case? Thanks in advance!
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It may be that you have a credit on your return, such as an earned income credit, that decreases as your income decreases. So, when you enter an expense and your income decreases, the credit decreases by an amount greater than the decrease in your tax, so your refund is reduced.
For instance, lets say your tax is $1,000 and you have an earned income credit of $500, so your net tax is $500, your tax less the credit. Next, you enter an expense that reduces your income so your tax goes down to $900. However, the credit is reduced to $300 because it goes down as your income goes down. So now, your tax is $900 less the credit of $300, so your net tax is $600. So, the added expense reduced your credit more than it reduced your tax, so you are worse off than when you started. If you had a refund it would go down in this case.
You will see your earned income credit on line 27 of your form 1040 and on schedule 3 you will see a list of other credits.
To view your form 1040 and schedule 1 to 3:
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