IRS business rule F1040-071-03

[ColoradoCPA1]

I have a client whose only income last year was alimony and unemployment. He wisely had federal and state income tax withheld from his unemployment, which was less than the $10,200 tax-free amount. Now that money is not taxable, and his return is generating a critical e-file diagnostic saying that the amount of federal withholding must be less than the total of certain categories of income (basically those sources that could generate withholding). 

The lacerte website gave me sufficient income to research the types of income that the diagnostic is referring to. It also gave me a link to "the Business rules section" of the IRS website. The link took me to a page that no longer exists, and my search of the IRS website did not provide any information about a "Business rules section" or the rule F1040-071-03 in particular.

The Lacerte rep I spoke with gave me the same info as the website, that they suggest paper filing the return, which of course will slow down the client's refund. So will e-filing and having the e-filing rejected. 

Has anyone else encountered this diagnostic before, or is familiar with the Business rule F1040-071-03?

[TaxGuyBill]

Unless the IRS changes their rules and reprogram their e-file computer, there is nothing you can do besides paper-file the tax return.