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surfah808
New Member

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

SHOULD I EVEN ENTER EXPENSES ON MY SCHEDULE C
1 Best answer

Accepted Solutions
SweetieJean
Level 15

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

Probably because of how some credits are calculated. You are required to claim all business expenses

But be sure it is not your Tax Due that is dropping.

View solution in original post

7 Replies
SweetieJean
Level 15

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

You are required to claim all business expenses
SweetieJean
Level 15

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

Probably because of how some credits are calculated. You are required to claim all business expenses

But be sure it is not your Tax Due that is dropping.

View solution in original post

VolvoGirl
Level 15

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

By increasing your deductions and expenses it will decease your income and you may not be getting as many credits as before like the EIC credit. You can't go by the refund monitor until you have entered everything in. Also after you reduce your income to zero there is no more refund to get back. But even though your taxable income goes down and you owe less income tax on it, you still owe SE Self Employment tax if you have a Net Profit.
ConfusionIsDisability
Level 3

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

Claiming expenses, you'd think would help reduce your tax liability not drop your refund, but I found that the income will reduce due to the expenses and if the income is less it could affect your credits; thus affecting your refund.

 

An explanation is here:  https://ttlc.intuit.com/community/taxes/discussion/why-are-all-my-business-expenses-making-my-refund...

ColeenD3
Expert Alumni

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

Some above posts are correct in that:

  1. Your EIC may go down along with your income
  2. You cannot forgo expenses in order to increase your EIC as this is tax fraud

 

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ConfusionIsDisability
Level 3

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

ColeenD3
Expert Alumni

WHY DOES MY REFUND DROP WHEN I ADD EXPENSES ON SCHEDULE C

A self-employed individual is required to report all income and deduct all expenses. Revenue Ruling 56-407, 1956-2 C.B. 564, deals with the issue of taxpayers not taking all allowable deductions in computing net earnings from self-employment for self-employment tax purposes. Rev. Rul. 56-407 held that under §1402(a), every taxpayer (with the exception of certain farm operators) must claim all allowable deductions in computing net earnings from self-employment for self-employment tax purposes.

Net earnings from self-employment are included in earned income for EITC purposes. It is defined by cross-reference to the definition of net-earnings from self-employment under I.R.C. §1402(a). This ruling applies equally to the EITC. CCA 200022051 also provides insight regarding deduction of Schedule C expenses.

 

SCH C and EIC

 

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