"Net" Schedule M

[Snaggletooth]

Customer (almost retirement age) has a business and a farm. Business made $12,000, Farm lost $9,000. I computed the Making Work Pay Credit by netting the two and showing $3000 as the base. Computed SE by choosing the Gross Profit method since will be drawing Social Security in a couple years. Software calculated $3000 as the MWP base anyway.

IRS sends taxpayer a refund check saying we should have used only the $12,000 profit for the MWP base plus the gross profit from farming. Any truth to this?

Drake software says no. TTB says the base should be the same as that which was used for EIC.

[Davc]

According to the worksheet in the instructions, Drake is correct. I had three clients receive extra money from IRS miscalculating the credit so far.

[Nashville]

Agree with Davc

From IRS published instructions, there is a place furnished for the Farm Optional Method, but this cannot be used if Sch F is reporting a loss. Apparently the IRS has sent several refund checks.

[appelman]

Time to retire?

If things have gotten so complicated that even the IRS software gets confused, maybe it's time to get out of this business!

[JenMO]

I've had several people get more money back than my software figures. Hard to tell people they have to send it back.

[Burke]

Just had one myself. No farm. No Sche C. Just flat out figured it differently and I cannot determine how they came up with the figure. Both MFJ had incomes under $12,000 and also received SS payments. My software did it correctly. Am inclined to just let TP keep the money.