Level 2

Question

Passive Schedule C income not included on Form 8960

Forum|Forum|3 years ago
January 23, 2023
3 replies
30 views

A client has Schedule C that is passive. I checked Sch. C question G re: material participation NO. I reported the profit on Sch. SE Adjustments Worksheet Part II line 7 so it is not subject to SE tax.

The profit is being shown on Form 8960 Line 4a and again on Line 4b so it is not being subject to the NII tax. I believe this is incorrect.

I have called Tech Support 3 times and spent hours on the phone with them. Issue has not been resolved.

Is my thinking correct? If so, did I not enter something somewhere? Or, is the software wrong.

Thank you.

ProSeries Professional

This topic has been closed for replies.

Just-Lisa-Now-

Intuit Community Champion

Ive never heard of passive Sch C income, whats the situation?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

L

LZK cpaAuthor

Level 2

A single member LLC business in which the sole member does not actively participate in the day to day operations.

Just-Lisa-Now-

Intuit Community Champion

But theyve hired someone that does, right? I dont understand how this can be considered passive.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

qbteachmt

Level 15

I agree with everyone else's input. You cannot be in business and yet not be in business. Being as the income is from a business, and this is a sole proprietorship (not set up as an investment), then it is subject to SE, even though you might have a retired owner (as an example).

Don't yell at us; we're volunteers

A

Anonymous

Here's some feedback I received:

In this scenario (a manual ‘SE Exempt’ entry on the SE Adj Wks lines 7 or 9 and not the Schedule C activity itself ), you will need to make a corresponding manual entry on the 8960 Wks Line 4b user entry table that offsets the calculated entry by the program in the table above. See screen shots below.

We hope this helps!

L

LZK cpaAuthor

Level 2

I realize it is possible to offset the reduction on the 896 worksheet. But a manual entry should not be needed.

The cross reference for Line 4B on Form 8960 Worksheet says:

From Schedule C, Activity Summary Smart Worksheet, line1 if the box is checked indicating the activity is a nonpassive trade or business not subject to net investment income tax.

Checking Line G NO on Schedule C makes the activity Passive on the Activity Summary Smart Worksheet. So nothing should transfer to Line 4B.

Note that the 2021 program was incorrect in that it did not pick up income from Schedule C on Form 8960.

It seems to me there is a programming error.

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