expenses for business are dramatically decreasing our return refunds

[chadarcy]

Before inputting business expenses our return was going to be over $3000 and after inputting the expenses it is going down to near $150.  This does not make any sense and I can not see where I have filled in incorrectly.  Does anyone have any ideas on where the problem may be or why it would reduce entering expenses.

Chad

[HelenC12]

@chadarcy 

Strangely enough, an income decrease can sometimes reduce your refund. One example is losing the refundable Earned Income Credit (EIC). When you reduce your earned income with expenses, the EIC gets reduced because it's based on your earned income. Up to a certain amount, the less income you report, the less your EIC, the lower your refund.

• Please refer to the EIC table to see the earned income and related EIC.

Note: When figuring your net earnings from self-employment, you must claim all your allowable business expenses. Source: Publication 596 - Internal Revenue Service.

[Edited 3/8/2021|5:54 AM PST]

[chadarcy]

@HelenC12 

I do understand a small reduction, based on what you have provided.  But I was not going to be eligible for the EIC with or without the expenses.  Our AGI filling jointly is about $85,000 with the expenses accounted for.  Without the expenses our Federal return would be $2376 and state would be $682.  With expenses it goes to $0 for Federal and State was $60

EIC would not change it this much would it, and I don't think we are even eligible to begin with because of our AGI.  Is there something else that may be affecting this, like me answering yes or no incorrectly to a specific question?  

Thanks, 

Chad

[DawnC]

Are you sure that you are looking at a refund amount and not a tax due amount?   Meaning are you sure that you don't have a tax due of 2,376 before entering expenses and the expenses are lowering the amount you owe?