I am finalizing my son's return and TT says he cannot file electronically because the tax withheld is greater than the sum of income. He received unemployment insurance last year for several months and did not go to work because his job was closed for COVID. Unemployment compensation is over $11K with dividends only about $40. The income exclusion for unemployment nets to -$10,200. Tax withheld is about $1,300 and income is around $1,100 after the income exclusion. Is there no way around filing via a traditional paper return? Is this a common occurrence in 2020 returns because of COVID rules and exclusions, etc.? Thank you!
You will probably have to file the return by mail - it is now common to require a paper return when tax withheld is greater than reported income. This "filter" is automated and there is no way around it in e-file systems that apply this rule.
In the past, cyber-criminals filed returns with fake W-2s showing large amounts of withholding with low amounts of income in order to get fraudulent refunds.
Since paper returns are manually processed (at least partially), they get more scrutiny and the IRS has longer to check for fraudulent activity. It appears late-breaking COVID tax rules and exclusions have created the unintended consequence of making it look like a return has questionable information, even when it doesn't..
You will probably have to file the return by mail - it is now common to require a paper return when tax withheld is greater than reported income. This "filter" is automated and there is no way around it in e-file systems that apply this rule.
In the past, cyber-criminals filed returns with fake W-2s showing large amounts of withholding with low amounts of income in order to get fraudulent refunds.
Since paper returns are manually processed (at least partially), they get more scrutiny and the IRS has longer to check for fraudulent activity. It appears late-breaking COVID tax rules and exclusions have created the unintended consequence of making it look like a return has questionable information, even when it doesn't..