The client had $27,142 in taxable wages, $222 interest, $15 dividends, $14 capital gain, $21,409 Sch C income and the $3,962 in rental income for an AGI of $50,951. Standard deduction & QBI of $3,979 for a taxable income of $22,172. The system calculated $496 of EIC. The IRS is disputing the EIC.
As Lisa pointed out, if it was 100% personal use then converted to 100% rental use, you DON'T enter any personal days. And you only enter the expenses that were incurred DURING the rental period (don't enter the full-year expenses).
Entering the personal days (which is wrong in your case) makes it non-passive income, which is why ProSeries is not treating it as Passive income that disqualifies EIC.
However, the law says that Passive Income can disqualify EIC, but so can "rents or royalties not derived in the ordinary course of a trade or business". Although rental income for a house would SEEM to be "rents", the program seems to interpret "rents" as rental of non-real estate, and I don't remember if that is correct or not.
@jllong you may want to file an amended return, entering personal use days will reduce your expenses....if your deductible totals arent correct, and your profit is lower, your client may very well qualify for EIC.
Might be worth looking into.
If you've got a profit on the Sch E worksheet and an amount on Line 5 of Sch 1, I dont know why its not appearing on Line E1 of that worksheet and disallowing EIC.
@TaxGuyBill youre really good with this kind of stuff, does anything jump out at you that would cause this?