Federal return rejection Reject Code F8960-019-04 Processing error Form 8960, Net Investment Income Tax. We do not have an estimate for when the problem will be resolved

[BligBlueLaser]

@tobias_funke 

What is the miscalculation you see?

[tobias_funke]

@BligBlueLaser  When you look at form 8960 and then look at lines 4a, 4b and 4c, this is where the issue is.

I have a loss for my LLC of (I will use made up numbers) -$1,000. This is entered into line 4a. Then for line 4b, TurboTax places $1,000 which makes line 4c to $0.

Line 4c should be -$1,000. Then when you do the math, it lowers line 8 which in turn lowers Line 12 and Line 16. Line 16 is multiplied by 0.038 (3.8%) thus the difference is not much but it still is there for Line 17. Then Line 17 feeds into Line 12 on Schedule 2 (Form 1040) which ultimately goes to Line 21 on Schedule 2. This then feeds Form 1040 Line 23.

It is a simple fix thus I do not see the issue for Turbo Tax to solve this. It all starts with Form 8960 Lines 4a-4c!!

[BligBlueLaser]

@tobias_funke 

FWIW not sure that’s a miscalculation:

As of 2022 (new instructions for Form 8960) you must include Schedule C income/loss on Line 4a, and then

enter the “non-passive” portion of that on Line 4b. Line 4c is equal to (4a - 4b).

So assuming your Schedule C loss was “non-passive” (i.e. a business in which you actively participated) the total on Line 4c should be $0

(-$1,000) - (-$1,000) = $0.

[jryansmith02]

Now that I have taken the time to look at the error in detail. The issue doesn’t seem to be line of the Rental Real Estate. That field is also for loss income which I have from expenses. If this value is not zero then you have to meet the next criteria. 

If Form 8960, 'NetRentalIncomeOrLossAmt' has a non-zero value, then it must be equal to Schedule 1 (Form 1040),

'RentalRealEstateIncomeLossAmt' unless all of the following conditions are true:

1) Filing status of the return is Married filing jointly or Qualifying widow(er) and

2) Form 8960, checkboxes 'Section6013gInd' and 'Section6013hlnd' are not checked and

3) Form 8960, 'Filing ThresholdAmt' equals 125000.

1 and 2 are true. 3 is not true because I’m filing married jointly which means my threshold should be $250,000 not $125,000. The error message is basically stating that the validation being done is against $125,000. I should be validated against $250,000 threshold based on the line 14 Instructions. So the 8960 is filled out correctly. 

Next, this is happening after it is submitted to the IRS. This means this validation is being done on the IRS side, not the TT side. 

[tobias_funke]

@BligBlueLaser 

Then I am mistaken and you are correct. Nonetheless, then is it a TT problem or IRS problem. Either way, it sucks and witnessed by 21 pages of comments.

[EddyJones]

Totally put off by TT's disregard to customers regarding this. All language is 'correct YOUR error and resubmit'; 'as soon as you fix YOUR error you can file again'. None of this is through anything us users have done wrong. Given TT's clearly broader reach in dealing with the IRS it would be excellent for them to have a resolution faster than mid-March.

And noted that HRB does not generate 8960 for those who do not need it. So that is the route for those who do not care to wait.

[BligBlueLaser]

@tobias_funke 

As to where the problem lies, I can't be 100% certain (who can?) but there's obviously been exhaustive discussion here and it appears TurboTax is correctly including in returns - and correctly filling in - Form 8960 for anyone "Who Must File" according to the 2022 Form 8960 instructions.

Add to that, the IRS's website page for "Known Issues" sure seems to describe this issue exactly, saying that the error in their systems causes e-filings to be "erroneously rejected." In short, they updated the instructions for the form but neglected to update the "business rules" in their systems which screen incoming e-filings. So when you do what the IRS tells you to do, the IRS systems reject the e-filing as incorrect. SNAFU.

As I'm sure you're already aware, the IRS says late-February to mid-March for a fix. I've already contacted the offices of my Congressperson and both Senators to see if they can get this issue prioritized. Not much else to do but wait? Seems to me that Occam's Razor is useful here: if the IRS says their systems are the problem with this error, then their systems are the problem.

As I summarized in a reply somewhere above regarding other tax prep options, at first a bunch of people filed via HRB but it sounded like HRB was not actually following the 2022 instructions (i.e., not attaching an 8960 with Sc. C on Lines 4a/4b). Then, after a few days, people started reporting that HRB *was* attaching an 8960. And users of some of the other tax prep sites are getting the same error we are (with 8960's filled in the same way).

There are also posts from folks here who say they "solved" the problem by not reporting income that should be on Form 8960, with the intention of first receiving an incorrect refund (or making an underpayment) and then amending later. Doesn't seem like a good idea, but that's not my business...

[denisep962]

I just got off the phone with the agent at TurboTax. She said that the only options are to wait a few weeks and try again or mail. She also said that we can continue to resubmit electronically as long as it continues to be rejected so there appears to be no limit to the number of times you can resubmit. Once it is accepted, however, you have to file an amendment.

I will probably try each week to see if it goes through unless I hear that the problem has been fixed. I resubmitted this morning just for the heck of it to see what happens. Again, not convenient but I certainly am not going to pay for another service since I have no assurance that this will work using any other service and no way of knowing with any degree of assurance that this is a TT problem vs an IRS problem.

My money is on IRS because I am not sure why IRS would even propose a solution in any time frame if it was not their problem. After all, why would they say they would have a solution for a TT problem? Having worked in IT for many years, I don't offer a fix for something unless I know for a fact that it is our problem. Otherwise, I direct the person to work with the software provider. So I guess that, as they say, is that. 

[BligBlueLaser]

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@EddyJones wrote:

And noted that HRB does not generate 8960 for those who do not need it. So that is the route for those who do not care to wait.

---

You're saying that TurboTax is generating an 8960 for filers where their MAGI (generally the same as AGI, Line 11 on Form 1040) is less than the thresholds below?

• Married Filing Jointly or Qualifying Widow(er) is $250,000, or
• Married Filing Separately is $125,000, or
• Single or Head of Household is $200,000

Based on my reading of the 2022 IRS instructions for Form 8960, this could be an actual TT issue if there are really examples of that happening.

[denisep962]

Also, the message in the email tells us that the return is being rejected by the IRS. Also, the spreadsheet tells us that it is an IRS business rule if I am reading this correctly. If this was a TT issue, why would they even take ownership of it? In my humble opinion, it is only a TT issue because the TT software is not compatible with the existing IRS business rules and when they fix their rule, the software will be updated. Just my own thought based on what this is saying. I could be wrong.

[jyates76]

What did you decide?  This seems to me very odd, I dont have any rental income so I have no need to even include this form.  It seems to me turbo tax side should be able to delete the form and not even transmit it, but you cant delete the form it lets you but then doesnt actually.  I feel like this is still a fixable thing on inuit's side.  We shoudnt have to week 3 plus weeks to e file and snail mail is absolutely not an option so it sits in a pile for 8 months at the IRS.

[BligBlueLaser]

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@jyates76 wrote:

I dont have any rental income so I have no need to even include this form.

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You should look at the 2022 Form 8960 instructions from the IRS, page 1, "Who Must File" and "Application to Individuals".

It is not just for people with rental income.

[Sgent]

Line 4a is clearly intended for rental income.  The new IRS instructions saying to report other types of business income on this line are obviously a mistake.  The answer isn't to blindly follow them in this case, and the IRS is incorrect that the business rule needs fixing, it's the typo in the instructions that needs fixing.

At some point months from now maybe the IRS will figure out that this instruction was incorrect, and not that, as the known issues say, "business rules" should be fixed to allow filing with numbers on 4a and 4b that really shouldn't be there.

In the meantime the right thing to do is to leave 4a and 4b blank just like in previous years.  TurboTax should get that and let you proceed to e-file with that edit.

[BligBlueLaser]

@jryansmith02

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 wrote:

The error message is basically stating that the validation being done is against $125,000. I should be validated against $250,000 threshold based on the line 14 Instructions.

Interesting!

The error message notwithstanding, is Line 11 on your 1040 (AGI) greater than or less than $250,000?

[kim_stone]

I went and filed on HRB and it went through the first time.   

Just the mere fact that TT admins on this thread have not made ONE comment is enough to send me elsewhere.  Terrible customer service.  If you are going to have this as an option and list people from TT that should respond, and then have a thread this large and not ONE comment.  Unnacceptable.

Also, I noticed when re-reading the reject that it says "may cause" rejection.  Wonder if it's only certain tax vendors that are being rejected- sounds like it.