[Updated February 10, 2023 7:55 am EST]
Still no updates from the IRS, although TT staffers are still suggesting to some users that an IRS fix is imminent. Stay tuned...
Meanwhile, two developments from HRB users: *Many* of the people who claimed their submissions were "accepted" at HRB are now getting themexactly the same cancellation- It just took longer to get rejected at HRB; and HRB appears to be completing form 8960 correctly (with "non-passive" income deducted on line 4b).
PLEASE READ THIS BEFORE COMMENTING
Why was my TurboTax e-file rejected by the IRS with rejection code F8960-019-04?
THIS IS NOT A TURBOTAX PROBLEM!
REPEAT, THIS IS NOT A TURBOTAX PROBLEM!
AGAIN, THIS IS NOT A TURBOTAX PROBLEM!
The IRS has confirmed a "known issue" in its systemsresulting in valid electronic applications being falsely rejected. The issue can affect anyone filing the 8960 form, regardless of which tax preparation service they use.
Of theIRS 2022 Known Issues Table:
Business Rules F8960-019-04 and F8960-003 may result in incorrectly rejecting returns.These Business Rules must be amended to reflect the updates to the instructions for Form 8960 (tax year 2022) regarding the specific instructions for line 4a to include amounts from Appendix C (Form 1040) that are included in Appendix 1 (Form 1040), line 3 and are reported on form 1041, line 3.
Only the IRS can fix this problem!
When can I file my taxes electronically? How will I know when the problem is fixed?
You may not be able to submit the e-file until sometime between late February and mid-March 2023. There is no other answer. You'll have to wait for the IRS to fix a known problem in their systems! Be patient!
From the latest IRS Known Issues table for 2022 (line 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 resolved, but the best way to know is to knowCheck the table on the IRS websitefrom 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 people have mentioned that the IRS has a limit of five (5) e-file attempts before requiring you to file paper files, although it's not clear if that's true. Just in case, I advise against clicking the "File My Taxes" button to verify that the IRS has fixed the issue. Check insteadthe IRS Known Issues Tablefor updates, or check here for updates.
But I know this is a TurboTax issue, not an IRS issue! I have the evidence...
Your evidence is wrong. The IRS says this is an IRS issue.
Open the IRS's 2022 Known Issues table and read line 74.
But the TurboTax review said I had no errors and I was still rejected. Isn't that proof that TurboTax is the problem?
In a word: NO. TheTurboTax Review checks your tax return for errors. IRS systems are NOT audited"Known Issues" and bugs in their business rules.
Your return was rejected because a"Known issue" with IRS systemsthis leads to erroneous rejections. The IRS specifically states this in their2022 Known Issues Table (Row 74).
Turbo Tax stinks! I will use H&R Block, TaxAct, FreeTaxUSA etc.
LOTS, LOTS of users of TaxAct, H&R Block, FreeTaxUSA and other tax prep services are reportingexactly the same erroneous rejection. When you receive this rejection code with TurboTax, your ability to file electronically is NOT any different than any other tax preparation service.
The issue is an IRS "known issue"– It is not a problem with a specific tax preparation service.
But I just submitted to H&R Block (or "H&R Block just accepted my return")
Are you sure your return has been accepted?by the IRS? Just because H&R Block didn't immediately raise an error/rejection or say "accepted" doesn't mean the IRS accepted/approved your return!
If you tried to use HRB, check line 4b of your form 8960 in the H&R block. If it's $0, sSee Note to H&R Block Users later in this post.
Will the IRS accept my return if I delete my 1099s or if I spoof the numbers to avoid theirsbroken business rules?
A few people have posted about how to avoid the erroneous rejection by deleting 1099s (i.e. not reporting income), fumbling numbers (e.g. entering fictitious rental income), or entering zeros (i.e. not followingthe instructions for Form 8960).
All these things are bad ideas:
- You would knowingly submit a false statement
- If you want to be honest, you will have to change your return later
- There is no guarantee that your return will be accepted by the IRS on any of these systems
You can submit the e-file within a few weeks (or sooner). Be patient. Tax fraud is not a solution.
A TurboTax employee told me to delete form 8960 or change line 4a/4b to 0$ and then try submitting the E file again
Unfortunately, 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 problem" is bad advice.It is very likely that your Form 8960 was filled out correctly by TurboTax. The problem is probably not with your Form 8960.
If I am unable to submit electronically now, I will simply submit my declaration by post
That's probably a very, very bad idea!
Paper claimants are experiencing exceptional delays - of two years or more - in processing their returns and issuing refunds. Don't you think it's a better idea to be patient and wait for the IRS to fix this particular issue?
Why is TurboTax filing Form 8960? I don't have rental income (or for any other reason you think you don't need this form)
The "NetRentalIncomeOrLossAmt" error code from your rejection letter is misleading - it is not a literal description of what the Form 8960 is used for. Don't take it literally!
In all likelihood, TurboTax includes the Form 8960 because you must file the Form 8960!
As directed by the IRS 2022 Form 8960 (Page 1), you must submit this form if your MAGI (generally the same as AGI, found on line 11 of your 1040) exceeds any of the following thresholds:
- Married joint filing or qualifying widow(s) is $250,000.
- Registering married couples separately costs $125,000.
- Single or head of household is $200,000.
If line 11 of your Form 1040 exceeds the above amount, you MUST submit Form 8960.
Why is my Schedule C income/loss included on line 4a? This is not rental income!
TurboxTax fills out form 8960 correctly!
Repeat, TurboxTax fills out form 8960 correctly!
TurboTax includes your Schedule C income on Form 8960, line 4a, becauseThe IRS instructions for line 4a (page 6) state that you must report your Schedule C income on line 4a. This is a new requirement as of TY2022 and the failure of the IRS to update their systems with this new requirement is the reason your return was denied.
Also note that any non-passive portion of this income/loss should be deducted on line 4b(see page 6 of the IRS instructions). Your Schedule C income/loss is “non-passive” if it stems from a business in which you are an active participant. If your non-passive income is NOT deducted on line 4b, you pay 3.8% net investment income tax (NIIT) on the amount on line 4aalthough it is not subject to the NIIT.
H&R block users should read the special note at the bottom of this answer.
Turbo Tax stinks! "I want a refund" or "I'll call my credit card company to reverse the charge"
First, you should ask yourself these questions:
- Do I understand that users of all tax preparation services (H&R Block, TaxAct, FreeTaxUSA, etc.) are getting the same rejection because the IRS hasn't fixed this "known issue" with IRS systems?
- Am I sure I want to re-enter my tax information with another tax advisory service when I'm likely to be rejected there as well?
- If I receive a refund from TurboTax, what tax preparation service will I use to file my 2022 taxes?
Attention H&R Block users
Although this appears to have been fixed (or perhaps never broke?), there have been several anecdotal reports that the H&R Block software was not subtracting "non-passive" Schedule C income on Line 4b, which would result in thisa net investment income tax (NIIT) of 3.8% levied on income not subject to this tax. Compare your HRB and TT Form 8960 – particularly lines 4a, 4b and line 17 (due to NIIT) – to make sure you are not overpaying.
View solution in original post
FAQs
What triggers IRS Form 8960? ›
If your net investment income is $1 or more, Form 8960 helps you calculate the NIIT you might owe by multiplying the amount by which your MAGI exceeds the applicable threshold or your net investment income—whichever is the smaller figure—by 3.8 percent.
What is Form 8960 modified adjusted gross income? ›For NIIT and IRS Form 8960, your MAGI is your Adjusted Gross Income (AGI) generally increased by the amount of foreign earned income you excluded. Additional adjustments to your AGI may be needed if you own, directly or indirectly, stock in a Controlled Foreign Corporation or Passive Foreign Investment Company.
Why does my federal tax return keep getting rejected? ›Tax returns get rejected frequently because a name or number on the return doesn't match information in the IRS or Social Security Administration databases. Typos and misspellings can be quick and easy to fix. You might even be able to correct the issue online and e-file again.
What is federal tax form 8960? ›Use Form 8960 to figure the amount of your Net Investment Income Tax (NIIT). Controlled foreign corporation (CFC). Generally, a CFC is any foreign corporation if more than 50% of its voting power or stock value is owned or considered owned by US shareholders on any day during the tax year.
How do you avoid net investment income tax? ›If we can increase investment expenses to lower our net income, that is another way to avoid the Net Investment Income Tax. Examples of expenses are rental property expenses, investment trade fees, and state and local taxes.
What triggers net investment income tax? ›As an investor, you may owe an additional 3.8% tax called net investment income tax (NIIT). But you'll only owe it if you have investment income and your modified adjusted gross income (MAGI) goes over a certain amount.
What income is subject to 3.8% net investment? ›...
Do I Need to Pay the Net Investment Income Tax?
| Filing Status | Income Threshold |
|---|---|
| Single or head of household | $200,000 |
| Married filing jointly | $250,000 |
The trader's interest and other investment expenses, to the extent the expenses aren't used to reduce the trader's self-employment income, may be deductible for NIIT.
Can you deduct state taxes on form 8960? ›The total of the state, local, and foreign income taxes that you paid for the current tax year is entered on line 9b of form 8960. Enter only the tax amount that is attributed to the net investment income. Do not include sales tax or any foreign income taxes paid for which you took a credit.
What is federal return rejection reject code F8962-070? ›E-file reject F8962-070 happens when your return is missing Form 1095-A Health Insurance Marketplace Statement. The IRS compares the information you enter on your return with what they have in their database. When something's missing or mismatched, your return gets rejected.
Will I get my state refund if my Federal was rejected? ›
Any state that is e-filed along with the federal tax return will automatically be rejected if the federal tax return is rejected.
How many times can my taxes be rejected? ›In fact, some people have their tax returns rejected multiple times before they finally get it right. Though filing a return over and over again isn't ideal, rest assured that you can technically resubmit as many times as necessary until your return is accepted.
What is proof of investment for income tax? ›Investment Proof: Simply submit a copy of your FD receipt or print out your FD receipt/statement from your bank website (net banking). Insurance Policy: Life Insurance Premiums are tax-deductible up to Rs 1.5 lakh per annum under Section 80C.
What is IRS Form 8959 used for? ›Purpose of Form
Use Form 8959 to figure the amount of Additional Medicare Tax you owe and the amount of Additional Medicare Tax withheld by your employer, if any. You will carry the amounts to one of the following returns. Form 1040.
Net investment income=Investment income−Investment expense. Underwriting leverage measures the efficiency of the use of capital resources by an insurance company to generate business.
Does the IRS know your investments? ›If you have investment accounts, the IRS can see them in dividend and stock sales reportings through Forms 1099-DIV and 1099-B. If you have an IRA, the IRS will know about it through Form 5498.
What are exceptions to net investment income tax? ›The NIIT also doesn't apply to certain types of income that taxpayers can exclude for regular income tax purposes such as tax-exempt state or municipal bond interest, Veterans Administration benefits, or gain from the sale of a principal residence on that portion that's excluded for income tax purposes.
How much investment income is tax free? ›The statutory threshold amounts are: Married filing jointly — $250,000, Married filing separately — $125,000, Single or head of household — $200,000, or.
What happens if you don't claim investments on taxes? ›If you fail to report the gain, the IRS will become immediately suspicious. While the IRS may simply identify and correct a small loss and ding you for the difference, a larger missing capital gain could set off the alarms.
Do you have to claim investment income on taxes? ›Yes, in that the IRS requires all investment income to be reported when your income tax return is filed.
Is the net investment income tax still in effect? ›
All About the Net Investment Income Tax
The NIIT is set at 3.8% for the 2022 tax year. To give some background, the net investment income tax is part of the Health Care and Education Reconciliation Act of 2010.
They're usually taxed at ordinary income tax rates (10%, 12%, 22%, 24%, 32%, 35%, or 37%). Long-term capital gains are profits from selling assets you own for more than a year. They're usually taxed at lower long-term capital gains tax rates (0%, 15%, or 20%).
What is considered income in an investment account? ›Investment Income: “Investment income” includes interest, rents, royalties, dividends, capital gains, and other income derived from an asset.
What are examples of NIIT? ›It might include dividends, interest payments and capital gains you realize when you sell a security, like a stock, for more than you originally paid for it. In addition, royalty payments, some types of annuity payments and rental income from real estate investments are also considered investment income.
Who is not subject to net investment? ›Single taxpayer with income less than the statutory threshold. Taxpayer, a single filer, has wages of $180,000 and $15,000 of dividends and capital gains. Taxpayer's modified adjusted gross income is $195,000, which is less than the $200,000 statutory threshold. Taxpayer is not subject to the Net Investment Income Tax.
What expenses can be deducted from investment income? ›If you itemize, you may be able to claim a deduction for your investment interest expenses—the interest paid on money borrowed to purchase taxable investments. This includes the interest on margin loans used to buy stock in your brokerage account and the interest on loans used to buy investment property.
Do I have to pay net investment income tax and capital gains tax? ›Net investment income tax is an additional tax that applies to high-earning individuals who owe capital gains tax. Individuals who pay net investment income tax also pay capital gains tax. But, not all individuals who pay capital gains tax owe NII tax.
Who is not subject to the net investment income tax? ›The NIIT also doesn't apply to certain types of income that taxpayers can exclude for regular income tax purposes such as tax-exempt state or municipal bond interest, Veterans Administration benefits, or gain from the sale of a principal residence on that portion that's excluded for income tax purposes.
What triggers a tax investigation? ›What triggers a tax investigation? Tax investigations and frequent tax audits are more likely if: you file tax returns late, pay tax late or make errors that need correcting. there are inconsistencies or substantial variations between different returns, such as a large fall in income or increase in costs.
How much tax do you have to pay on investments? ›Long-term capital gains and qualified dividends are generally taxed at special capital gains tax rates of 0 percent, 15 percent, and 20 percent depending on your taxable income. (Some types of capital gains may be taxed as high as 25 percent or 28 percent.)
Do you pay taxes on investments if you don't sell? ›
You typically only have to pay taxes on the sale of investments when you receive a gain. To figure this out, you have to subtract the cost basis of your investment, which is normally what you paid, from the sale price to see if you had a gain or a loss.
What is net investment and can it be negative? ›Net investment indicates how much a company is spending to maintain and improve its operations. If net investment is positive, the company is expanding its capacity. If net investment is negative, its capacity is shrinking.
Can investment be positive when net investment is zero? ›When the gross investment is more than the depreciation, the net investment will be positive, and the total productivity will also increase. Likewise, when the gross investment is the same as depreciation, the net investment will be equal to zero, and the productivity will remain static.
Is rental income considered investment income? ›Rental ownership is an investment, not a business, if you do it to earn a profit, but don't work at it regularly and continuously—either by yourself or with the help of a manager, agent, or others.
How do you tell if IRS is investigating you? ›- You are informed by your bank that your records have been subpoenaed by the U.S. Attorney's Office or the CID (IRS Criminal Investigation Division). ...
- If you are currently being pressured by an IRS agent and they suddenly stop contacting you.
- Not reporting all of your income.
- Breaking the rules on foreign accounts.
- Blurring the lines on business expenses.
- Earning more than $200,000.
The IRS has a computer system designed to flag abnormal tax returns. Make sure you report all of your income to the IRS, including investment income or gambling earnings. Cash businesses, large amounts of foreign assets, and large cash deposits are some of the things that can trigger an IRS audit.