I Must Be Doing Something Wrong :(

[thatgagirl]

I am on the schedule C, entered the income, tax refund went to 4000ish enter the deductions for rent, util, advertising and expenses and it DROPPED 1k???

I thought deductions raised your refund? I might as well just take the deductions off i guess

Anyone have any ideas on the problem. I am sitting here with a copy of Tom Copeland's record keeping guide in my lap and I use minute menu to keep track of expenses...

[TomCopeland]

Something wrong?

I don't know why it happened. That's one of the frustrating things about using software - you often don't know where the numbers come from.

[marniewon]

I started doing my taxes yesterday and the same thing happened to me. Not sure about it, but I figure that it's not really a refund that's showing, but what I owe. I'll know for sure when I add in my husband's info, as we will definitely get a refund once his info is in.

[thatgagirl]

I looked at the summary and i get a refund (when i don't add in my deductions on schedule C) if I add in the deductions (rent, util, advert, supplies) i get less of a refund. I just deleted all the deductions and left the income. Def not claiming the deductions if they lower my refund! ! Most of my refund is because I worked a regular job 6 mos before starting daycare and i am single with 2 kids (so EIC)

[TomCopeland]

Something Wrong?

Now I understand what happened. It's because you are eligible for the Earned Income Credit (EIC). This credit is for low income families. The way the credit works is that it is possible you will get a lower refund when claiming all your business expenses. (I know, this sound goofy, but that's the way it works.) However, IRS rules state that you must claim your business expenses in this situation. This doesn't seem fair, but that's the rule.