Why did the IRS return my NIIT? (Form 8960 Question)

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
mega317
Posts: 5705
Joined: Tue Apr 19, 2016 10:55 am

Why did the IRS return my NIIT? (Form 8960 Question)

Post by mega317 »

My refund was larger than expected by the amount of my NIIT and I'd like to understand why. The numbers here aren't large but this is what I have on 8960:

Code: Select all

Line 	1 	173
	2	2,454
	4a	24,382
	4b	-24,382
	4c 	0
	5a	-1
	5d	-1
	8	2,626 (total investment income)
	16	2,626 (is smaller than line 15)
	17	100
On the IRS transcript "total investment income per computer" is -21,745, which happens to be my actual investment income minus the schedule C correction on 4b. Then NIIT "verified" and "per computer" are $0.

Is this right? Doesn't seem like it.
User avatar
MP123
Posts: 4084
Joined: Thu Feb 16, 2017 2:32 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by MP123 »

mega317 wrote: Fri Mar 24, 2023 1:53 pm Is this right? Doesn't seem like it.
Doesn't seem right. Is "material participation" checked on Sch C line G? Not sure if they cross reference that.
Topic Author
mega317
Posts: 5705
Joined: Tue Apr 19, 2016 10:55 am

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by mega317 »

Yes material participation is checked. I can't understand how or why a positive number on schedule 1 line 3 could ever decrease net investment income--if not checked then investment income would have gone up.
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by pizzy »

mega317 wrote: Fri Mar 24, 2023 1:53 pm My refund was larger than expected by the amount of my NIIT and I'd like to understand why. The numbers here aren't large but this is what I have on 8960:

Code: Select all

Line 	1 	173
	2	2,454
	4a	24,382
	4b	-24,382
	4c 	0
	5a	-1
	5d	-1
	8	2,626 (total investment income)
	16	2,626 (is smaller than line 15)
	17	100
On the IRS transcript "total investment income per computer" is -21,745, which happens to be my actual investment income minus the schedule C correction on 4b. Then NIIT "verified" and "per computer" are $0.

Is this right? Doesn't seem like it.
Same thing happened to us. NIIT "verified" and "per computer" are $0. Return processing was delayed (and still is), but transcript updated today.
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
Topic Author
mega317
Posts: 5705
Joined: Tue Apr 19, 2016 10:55 am

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by mega317 »

pizzy wrote: Sat Mar 25, 2023 3:35 pm Same thing happened to us. NIIT "verified" and "per computer" are $0.
Interesting. Wonder if there is a bug in their system?
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by pizzy »

mega317 wrote: Sun Mar 26, 2023 4:07 pm
pizzy wrote: Sat Mar 25, 2023 3:35 pm Same thing happened to us. NIIT "verified" and "per computer" are $0.
Interesting. Wonder if there is a bug in their system?
Must be. They can have it back if/when they catch their error. I’m content moving on for now.
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
rpink
Posts: 1
Joined: Sun Mar 26, 2023 6:47 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by rpink »

pizzy wrote: Sat Mar 25, 2023 3:35 pm
mega317 wrote: Fri Mar 24, 2023 1:53 pm My refund was larger than expected by the amount of my NIIT and I'd like to understand why. The numbers here aren't large but this is what I have on 8960:

Code: Select all

Line 	1 	173
	2	2,454
	4a	24,382
	4b	-24,382
	4c 	0
	5a	-1
	5d	-1
	8	2,626 (total investment income)
	16	2,626 (is smaller than line 15)
	17	100
On the IRS transcript "total investment income per computer" is -21,745, which happens to be my actual investment income minus the schedule C correction on 4b. Then NIIT "verified" and "per computer" are $0.

Is this right? Doesn't seem like it.
Same thing happened to us. NIIT "verified" and "per computer" are $0. Return processing was delayed (and still is), but transcript updated today.
Exact same thing happened on mine. My tax transcript shows "total investment income per computer" was reduced by the exact amount of my Schedule C profit (I had no rental real estate, royalties, partnerships, or S corp income on line 4a, just Schedule C income). It's seems like the IRS 'computer' is saying Line 4a on Form 8960 should be blank, 4b should be your Schedule C profit (entered as a negative), which would make line 4c the same as 4b and thus reduce your total Net investment income. I know there was an issue earlier this year with Form 8960 on the IRS business rules, but this seems like an additional error (in favor of the taxpayer).
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by stan1 »

Just curious what tax software did you use, and did you e-file or print the paperwork and mail?
Or did you fill out the forms manually?
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by pizzy »

stan1 wrote: Sun Mar 26, 2023 7:04 pm Just curious what tax software did you use, and did you e-file or print the paperwork and mail?
Or did you fill out the forms manually?
TurboTax Home and Business Download, eFile.
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
Topic Author
mega317
Posts: 5705
Joined: Tue Apr 19, 2016 10:55 am

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by mega317 »

FreetaxUSA, efile for me. I also input all numbers into Turbotax online and ended up with the same refund amount.

I'm shocked that they wouldn't immediately catch an error that is zeroing out NIIT for high earners.
Magikmike
Posts: 11
Joined: Thu Mar 23, 2017 8:59 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by Magikmike »

Same issue here. Had Schedule C income come over to 8960 as positive number which was adjusted out with equivalent negative number. Looks like the computer ignored the positive number in line 4a and instead only carried the negative adjustment onto line 4c. That caused my NIIT to be negative. I’ve been trying to figure out what I did wrong but it looks like it’s technical bug. Glad to hear. Please share how it’s resolved if anyone gets a resolution soon.
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: Why did the IRS return my NIIT? (Form 8960 Question)

Post by pizzy »

Magikmike wrote: Wed Mar 29, 2023 1:00 pm Same issue here. Had Schedule C income come over to 8960 as positive number which was adjusted out with equivalent negative number. Looks like the computer ignored the positive number in line 4a and instead only carried the negative adjustment onto line 4c. That caused my NIIT to be negative. I’ve been trying to figure out what I did wrong but it looks like it’s technical bug. Glad to hear. Please share how it’s resolved if anyone gets a resolution soon.
Since we filed correctly and have the returns to match, there's nothing we should have to do. Once fixed, I assume we get a bill to pay back the NIIT. In the meantime, I will sit on my hands.
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
Post Reply