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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

Forum|Forum|3 years ago
January 28, 2023
64 replies
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Description of error:
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 'Section6013hInd' are not checked and 3) Form 8960, 'FilingThresholdAmt' equals 125000.
What needs to be done:
This return cannot be electronically filed due to a processing error on Form 8960, Net Investment Income Tax. At this time we do not have an estimate for when the problem will be resolved. You have two options: 1) you may wait a few weeks and attempt to resubmit this return, or 2) you may print and file the return by mail. This message will be updated when a resolution date is identified

Any idea how to correct this? Thanks!

TurboTax Self Employed Online

Best answer by BligBlueLaser

[Updated Feb 17, 2023]

According to Turbo Tax: This issue will be resolved on February 19, 2023. On or after this resolution date you may resubmit this return for electronic filing.

[Updated Feb. 10, 2023 7:55AM EST]

Still no updates from the IRS, though TT employees are still suggesting to some users that an IRS fix is imminent. Stay tuned...

Meanwhile two developments with HRB users: *many* of the people who claimed their filings were "accepted" at HRB are now receiving the exact same rejection - it just took longer to get rejected with HRB; and HRB appears to be completing Form 8960 correctly (deducting "non-passive" income on line 4b).

PLEASE READ THIS FIRST BEFORE COMMENTING

Why was my TurboTax e-file rejected by the IRS with Reject Code F8960-019-04?

THIS IS NOT A TURBOTAX ISSUE!

REPEAT, THIS IS NOT A TURBOTAX ISSUE!

ONCE MORE, THIS IS NOT A TURBOTAX ISSUE!

The IRS has confirmed a “Known Issue” in their systems which causes valid e-filings to be erroneously rejected. The issue can affect anyone filing Form 8960, regardless of which tax prep service they use.

From the IRS spreadsheet of 2022 "Known Issues":

Business Rules F8960-019-04 and F8960-003 may cause returns to erroneously reject. These business rules need to be modified to reflect the updates to the Instructions for Form 8960 (Tax Year 2022) regarding the Specific Instructions for Line 4a to include Schedule C (Form 1040) amounts reported on Schedule 1 (Form 1040), line 3 and Form 1041, line 3.

Only the IRS can fix this issue!

When will I be able to e-file my taxes? How will I know when the issue is fixed?

You may not be able to e-file until sometime between late February to mid-March 2023. There is no other answer. You must wait until the IRS fixes a known issue in their systems! Be patient!

From the latest IRS’s 2022 “Known Issues” spreadsheet (Row 74),: “Business Rules will be updated sometime in late February to mid-March 2023.”

I'll update this post when we know the issue is fixed, but the best way to know is to check the spreadsheet on the IRS’s website from time to time to see if there have been any updates.

Or you can wait for a notification from TurboTax that may never come...

CAUTION: A few folks have mentioned that the IRS has a limit of five (5) e-file attempts before requiring that you paper file, though it's not clear if that's true. Just in case, I recommend against hitting the "File My Taxes" button as a way of checking if the IRS has fixed the problem. Instead, check the IRS's "Known Issues" spreadsheet for updates, or check back here for updates.

But I know this is a TurboTax problem, not an IRS problem! I have the evidence…

Your evidence is wrong. The IRS says this is an IRS problem.

Open the IRS’s 2022 “Known Issues” spreadsheet and read Row 74.

But TurboTax review said I had no errors, and I was rejected anyway. Isn't that proof that TurboTax is the problem?

In a word: NO. The TurboTax review checks your tax return for errors. It does NOT review IRS systems for "Known Issues" and errors in their business rules.

Your return was rejected because of a "Known Issue" with IRS systems that results in erroneous rejections. The IRS specifically states this in their 2022 "Known Issues" spreadsheet (Row 74).

TurboTax stinks! I’m going to use H&R Block, TaxAct, FreeTaxUSA, etc.

MANY, MANY users of TaxAct, H&R Block, FreeTaxUSA, and other tax prep services are reporting the exact same erroneous rejection. If you’re receiving this rejection code with TurboTax, your ability to e-file will NOT be different with another tax prep service.

The problem is an IRS “Known Issue” – it is not a problem with any specific tax prep service.

But I just filed with H&R Block (or "H&R Block just accepted my return")

Are you sure your return was accepted by the IRS? Just because H&R Block didn't immediately throw an error/rejection, or said "accepted," does not mean the IRS has accepted/approved your return!

If you tried to use HRB, check Line 4b of your Form 8960 on H&R Block. If it is $0, see note for H&R Block users further down in this post.

Will the IRS accept my return if I delete my 1099s, or if I fudge the numbers, to avoid their faulty business rules?

A few folks have posted about avoiding the erroneous rejection by deleting 1099s (i.e. not reporting income), fudging numbers (e.g., entering fictitious rental income), or entering zeros (i.e., not following the instructions for Form 8960).

All of these things are bad ideas:

You would be knowingly filing a false return
If you want to keep it honest, you'll have to amend your return later
There is no guarantee that any of these schemes will get your return accepted by the IRS

You'll be able to e-file within just a few weeks (or sooner). Be patient. Tax fraud is not the answer.

A TurboTax employee told me to delete Form 8960, or change Line 4a/4b to $0, and then try to e-file again

Sadly many TT employees don't seem to know what they're talking about. Any advice other than, "You must wait for the IRS to fix the issue" is bad advice. It is very likely that your Form 8960 has been filled in correctly by TurboTax. The problem is probably not with your Form 8960.

If I can’t e-file now, I'll just file my return by mail

This is probably a very, very bad idea!

Paper filers are experiencing extraordinary delays - of two years or more – for getting their returns processed and refunds issued. Don’t you think it’s a better idea to be patient and wait until the IRS fixes this particular problem?

Why is TurboTax filing Form 8960? I don’t have rental income (or any other reasons you think you don’t need this form)

The error code “NetRentalIncomeOrLossAmt” from your rejection notice is misleading - it is not a literal description of what Form 8960 is used for. Do not take it literally!

In all likelihood, TurboTax is including Form 8960 because you are required to file Form 8960!

According to the 2022 Form 8960 instructions from the IRS (page 1), you are REQUIRED to file this form if your MAGI (generally the same as AGI, found on Line 11 of your 1040) exceeds one of the following thresholds:

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

If Line 11 of your 1040 exceeds the amount above, you MUST file Form 8960.

Why is my Schedule C income/loss included on Line 4a? That’s not rental income!

TurboxTax is completing Form 8960 correctly!

Repeat, TurboxTax is completing Form 8960 correctly!

TurboTax includes your Schedule C income on Form 8960 Line 4a because the IRS instructions for Line 4a (page 6) say you must include your Schedule C income on Line 4a. This is a new requirement as of TY2022, and the IRS's failure to update its systems with this new requirement is why your return was rejected.

Also note, any non-passive portion of that income/loss should be subtracted on Line 4b (see page 6 of the IRS instructions). Your Schedule C income/loss is “non-passive” if it is from a business in which you actively participate. If your non-passive income is NOT deducted on Line4b, you will pay the 3.8% Net Investment Income Tax (NIIT) on the Line 4a amount even though it is not subject to the NIIT.

H&R Block users should read the special note at the bottom of this reply.

TurboTax stinks! “I want a refund” or “I’m calling my credit card company to reverse the charges”

First you should ask yourself these questions:

Do I understand that users of all tax prep services (H&R Block, TaxAct, FreeTaxUSA, et.al.) are getting the same rejection because the IRS has not fixed this “Known Issue” with IRS systems?
Do I really want to re-enter my tax data with a different tax prep service when I am likely to be rejected there as well?
If I get a refund from TurboTax, what tax prep service am I going to use to file my 2022 taxes?

Attention H&R Block Users

Although this seems to be fixed (or maybe it was never broken?), there were several anecdotal reports that H&R Block software was not subtracting "non-passive" Schedule C income on Line 4b, which would result in a 3.8% Net Investment Income Tax (NIIT) being levied on income that is not subject to this tax. Compare your HRB and TT Forms 8960 - especially Lines 4a, 4b, and Line 17 (NIIT owed) - to be sure you're not paying too much.

Show previous replies

C

cjtaxguy

Level 2

Where are you seeing the resolution date is February 5th. The IRS known issues and solutions worksheet I see does not provide a resolution date. It implies a likely fix is late February or early March.

R

RixReeves

Level 2

Correct, that spreadsheet was just updated today. Prior to today, it had stated 2/5

G

Gomez1206

Level 2

Received same rejection. First time. No rental income but interest on a savings account amounts to investment income, which I believe is the reason for my error. Hopefully resolved soon.

P

pdlink300

Level 2

So glad this issue is known about and common. Been banging my head against a wall all morning trying to figure out why the heck TT was including form 8960 in the first place.

Bottom line, the IRS screwed the pooch with their automatic accept/reject system, and we are all wasting our time trying to fix it within TT. The fact that form 8960 was even included in my return is abjectly ridiculous. I have no investment income, and somehow the system keeps putting self employment income in 8960 box 4a, and then the negative of box 4a in box 4b.

TT should be updated to recognize this situation and simply not include form 8960. I pay $$$ to TT so I don't have to deal with this nonsense. Get on this TT or you're going to lose me as a customer.

BligBlueLaser

Level 5

@pdlink300 wrote:
TT should be updated to recognize this situation and simply not include form 8960. I pay $$$ to TT so I don't have to deal with this nonsense. Get on this TT or you're going to lose me as a customer.

Except that the IRS updated Form 8960 instructions to say that you must include these amounts if you are required to file Form 8960.

Do you meet the MAGI requirements for filing found on page 1 of the IRS instructions? If yes, I suppose TT could allow you to just delete the form but that wouldn't be correct.

From that PDF:

Who Must File - Attach Form 8960 to your return if your modified adjusted gross income (MAGI) is greater than the applicable threshold amount.

[...]

The applicable threshold amount is based on your filing status.
• Married Filing Jointly or Qualifying Widow(er) is $250,000.
• Married Filing Separately is $125,000.

• Single or Head of Household is $200,000.

If you don't meet any of those thresholds, then yeah TT needs to fix something.

P

pdlink300

Level 2

Makes sense and thanks - I was blowing off steam. It's the IRS's problem and TT is creating returns correctly.

I still think TT should have some way of recognizing this prior to e-filing. Perhaps preemptively tell users with this issue to wait until the IRS fixes their buggy accept/reject software before filing. It could be part of the "checking your return for issues" feature. That way we don't all waste our time and patience trying to track this down ourselves.

P

pmb33

Level 2

When is TurboTax going to address this issae? After paying for the last 20 years for TurboTax I would think they would address this.

C

carlosocampo55

Level 2

the IRS website updated the issue to this:

”Business Rules will be updated sometime in late February to mid-March 2023.”

S

shelhed217

Level 2

All the people saying we are going to die using HRB, I just want you to know I don’t have investment income. TT is putting my self employed income on form 8960. That’s not an IRS issue. Not saying there are not other things going on but for me TT has failed.

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pmb33

Level 2

Exactly my issue

S

spatch1215

Level 3

Having the same problem with Reject Code F8960-019-04 and the IRS not accepting Turbotax's e-return on 2/4. Any updates on how to fix this? Thanks.

ScottSMN

Level 2

I just sent the first note off via my senators' website. Please like so others will see this and act.

Subject: E-filing Processing error (Form 8960) is erroneously rejecting returns

Dear Senator ___________, (Reps are just Mr., Ms, or Mrs.)

I wanted to draw your attention to an issue at the IRS. The IRS has a known error related to Form 8960, Net Investment Income Tax. As with everything in taxes, it is a bit complicated to explain. I will do my best high-level explanation and if more information is needed, please reach out.

The profit or loss from non-W-2 wages is added on line 4a. Income here would include, for example, compensation reported on a Form 1099 and income from a real estate venture. Line 4b is income from a “non-passive” source. That figure is deducted from Line 4a, and the net is used in the tax calculation that separates active, passive and investing income as required by The Tax Reform Act of 1986. Tax software systems are correctly completing this process, however, there is an issue on how the IRS processes the electronic filing.

My personal experience has been with TurboTax, a leading tax software program for individuals to use. Shortly after e-filing, my return was rejected. The IRS is erroneously assuming the income on line 4a is from real estate ownership, which would require a Schedule E, Supplemental Income and Loss (From rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc.) to be included with the return. My 4a amount is from a miscellaneous 1099 for a business in which I actively participated. Despite line 4a and 4b being the same figure, resulting in no passive income, my filing was rejected (F8960-019-04) for the lack of a Schedule E, or more specifically, no amounts on Schedule E. Again, no Schedule E is required.

The result of this issue will negatively impact electronic filings for many tax payers who file a Schedule C. This would include people in the trades, independent contractors, and anybody with a “side hustle” when they are unable to get their return filed and, more importantly, get their refunds. While paper filing is an option, doing so will add at least six additional weeks from the time the IRS receives the return to get one’s refund. The IRS’ reputation for addressing paper returns makes me think that delay could be understated by weeks, if not months.

Some individuals have noted that they filed electronically after switching to H&R Block’s tax software. First and most obviously, this is duplicating their time, effort, and cost to complete their taxes. There could be consequences later because a Form 8960 was not filed.

As I noted earlier, this is a known issue that is included on the 2022 spreadsheet of issues:

https://www.irs.gov/pub/irs-schema/ty[product key removed]s-and-solutions.xlsm

Earlier in the week, Line 74 stated that the issue was logged 1/17/2023 with a projected resolution date of 2/5/2023. Recently, that information changed. The same issue on the same line now has a 2/1/2023 entered date (overriding 1/17/2023) with the projected date cell now stating “Business Rules will be updated sometime in late February to mid-March 2023.”

So now after waiting 10 days for the February 5 fix to arrive, it is pushed to mid-March. Maybe even later if the IRS makes a change like they just did. This is insane that it is not already resolved.

I would respectively ask that you look into this issue and convince the Treasury Department immediately address this programming bug.

Sincerely,

{full name}

G

gregkzn

Level 5

Thank you so much for supplying that letter. I’ve already emailed both of mine. It usually takes them two weeks to reply, but hopefully something can get done.

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Pbenitez1

Level 2

It appears this issue will be resolved on IRS end on 02/05/2023. Once fixed by the IRS, we should all be able to file.

Business Rules F8960-019-04 and F8960-003 will be updated in early PY2023. https://www.irs.gov/e-file-providers/known-issues-and-solutions

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gregkzn

Level 5

Nope. Look at it carefully this is the newest update on the timeframe. copied and pasted below.

Business Rules will be updated sometime in late February to mid-March 2023.

K

kyfiler

Level 2

I was told on Feb 1 that it’s an IRS problem. Was provided the link (shown in a prior message in this thread) which indicated it should be fixed on Feb 5. I checked last night (Feb 4) and the IRS now says it’ll be resolved in late Feb to mid Mar. This is unacceptable. Form 8960 (for me, anyway), generated because I have a small business. So EVERY single-member LLC will experience this same issue u til resolved. I’m owed $20k. This is not an insignificant problem. I’ll be calling my House Rep and Senator on Monday.

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Sgent

Level 2

Also single-member LLC. I have a net loss on the year - nothing to do with Rental Income - and for some reason TurboTax is putting this net loss into Form 8960 Line 4a, then offsetting it with a positive value in the same amount in 8960 Line 4b, so that 8960 Line 4c nets out to 0. Last year, TurboTax left both 4a and 4b blank, even though the other numbers/forms for the business were almost exactly the same.

So I think this is a TurboTax error and not an IRS error. Because if I could just blank out lines 4a and 4b in Form 8960 manually, the error (which is due to there being a non-zero value in 8960 line 4a) wouldn't be there.

However, I tried going to Form 8960 itself in TurboTax and using Edit-Override to blank out 4a and 4b, which works for the form. But then TurboTax won't let me e-file. TurboTax gives me this error that says:

Form 8960: Part 1, line 4a should not be overridden and changed for Electronic Filing. Using an override can prevent the cross-checking that's important to an accurate tax return. To cancel the override, click on the overriden field and choose 'Override" from the edit menu.

So I think the problem here is that something in TurboTax is erroneously placing values into lines 4a and 4b on Form 8960, and nothing with the IRS. And then TurboTax won't let you e-file if you manually fix it.

G

gregkzn

Level 5

So I went ahead and took the plunge and bought HRB and filed with it. Now my 8960 line 4a shows $108.,line 4b $0, total line 4c $108 and line 8 $108 like it should be. TT put $108 line 4a , $ -108 line 4b, line 4c $0 and line 8 $0 which is where the error is. My return has not yet been excepted but definitely not rejected in less than an hour like TT.

H

hellocward

Level 2

Hi, have this error and talked to an expert 2/5/2023. He said this is being addressed right now, and better to wait to e-file than to submit by mail: IRS won't even begin looking at mail filings until April.

B

B1GM0N3Y86

Level 2

Spoke to TT last night. I don't have much confidence in any of them any longer. I was advised by both the representative and the supervisor to just Delete Form 8690. I advised them I have had to file this form every year due to income that I have.

I ended up speaking to TT resolution today in regards to the amazing recommendations their tax people advised me on doing, ended up with a 50% discount for my troubles.