Weird E-File Reject I Can't Solve

[Chowdahead]

I have a client who made just over the Unemployment Compensation Exclusion:  $10,341.  When the exclusion is applied on Sch 1, the remailing amount is only $141 that transfers to the 1040, because she had no other income.  However, she had $1,026 federal tax withheld from her unemployment compensation, so she's due a refund.  She also claiming the Recovery Rebate Credit, but that's unrelated.

However, I keep getting this E-File reject message (see attachment) which seems to be be a bug based on a rule before the exclusion existing.  I can't seem to delete the exclusion either, and even if I could it would probably cause a delay anyway.

Any ideas?  I hate to tell this woman she needs to paper file.  She may not see the refund until 2022.

[Pacun]

Since the standard deduction is big... you could just enter 11,341 as unemployment and that will make room for the 10% withholding.  I think the IRS will appreciate that efile because paper filing is a pain for everybody... including the IRS.

 

[Chowdahead]

I was thinking the same thing, but I assumed that if the reported amount doesn't match was was reported on the 1099-G, it may cause it to be flagged anyway.

[beckster2010]

Add $1.00 in other income.  

[Slippery Pencil]

$1 won't work.  The error says the income has to exceed the $1026 withheld.  If you don't want to add $1000 to unemployment or miscellaneous, you could add $1000 as a qualified dividend or a ROTH distribution.

[jklcpa]

I'd try entering the withholding as an estimate or other payment.  That will take it off from the withholding line and still give credit for the amount paid toward the tax liability. It's won't be on the correct line, but I'd rather do that than enter nonexistent income to the return.

[EAinCNY]

I had one like this also, I got around it by putting $1 of income on a Sch D. Was able to e-file it that way.

[Pacun]

On ‎6‎/‎1‎/‎2021 at 11:40 AM, Chowdahead said:

I was thinking the same thing, but I assumed that if the reported amount doesn't match was was reported on the 1099-G, it may cause it to be flagged anyway.

The entry with less flags is adding 1K to the existing 1099G. 

I have not seen a bigger flag than paper filing these days.

[ATL EA]

 

Hi, 

Here are a couple options.

1. The $1 on Schedule D does work as an amount on line 7 of the 1040 is one of the items that triggers an exception to the business rule.  Here's the text of the business rule.  You can back out the capital gains distribution by entering a negative $1 with the description "BR1" on Schedule 1, line 8 to offset that income.  If you talk to your software provider's customer service, they may present this as an option (even though IRS has not officially published this  workaround anywhere).

Form 1040, 'WithholdingTaxAmt' must be less than the sum of the following:
['WagesSalariesAndTipsAmt' and 'TaxableInterestAmt' and 'OrdinaryDividendsAmt' and
('IRADistributionsAmt' or 'TaxableIRAAmt') and ( 'PensionsAnnuitiesAmt' or
'TotalTaxablePensionsAmt' ) and 'SocSecBnftAmt' and Schedule 1 (Form 1040),
'UnemploymentCompAmt' and ( all 'OtherIncomeAmt' in [OtherIncomeTypeStatement] ) and ( all
Schedule C (Form 1040), 'TotalGrossReceiptsAmt' )] unless one of the following is true: (1) Form
1040, 'CapitalGainLossAmt' has a non-zero value; (2) Schedule 1 (Form 1040),
'OtherGainLossAmt' or 'RentalRealEstateIncomeLossAmt' or 'NetFarmProfitLossAmt' has a nonzero
value; (3) Combat Pay has been excluded from wages.

 

2.  The IRS has an excel sheet of known issues at https://www.irs.gov/e-file-providers/known-issues-and-solutions and it has a solution for this business rule.  The biggest issue with this method imo is at the state level for those states that are conforming to the unemployment exclusion.

Issue:  Business rule F1040-071-05 will trigger if the taxpayer’s only source of income is Unemployment income and there is withholding being claimed.  The business rule will reject returns when the income is zeroed out due to the unemployment compensation exclusion.

Solution:  In order to bypass the rule, do not claim the unemployment compensation exclusion if the unemployment income is less than the standard deduction.  Use the standard deduction to bring the taxable income to zero.  

[jklcpa]

Hi ATL EA, welcome to the group and thanks for that explanation. Clearly I was wrong in what I most recently posted and have hidden that post.