H&R Block Software Won't Let me File electronically

Has anyone else run into this? I entered all my data into H&R Block software and got to the final steps of preparing to file electronically. I entered all my checking account information, scheduled the date I would pay my taxes due to the IRS and then clicked on the final step which was to do the actual filing. To my great surprise, the software came back with a "Unfortunately, you can?t e-file this year...This return cannot be electronically filed because you have a line entry on Schedule B for previously reported bond interest adjustment. You?ll have to print and mail your 2019 return instead".
What they are referencing is that I am using the accrual method of EE Savings Bond interest reporting, which is allowed under IRS rules. That means I have EE savings bonds which I have held since 1992 and years ago decided to pay the tax on the accrued interest to that point. Every year since then I have paid tax on the interest earned in that year, even though I still have the bonds. In 2019 I cashed a couple of bonds and the IRS sent me a 1099 that included all the interest that had accrued since 1992, much of which I had already paid. So again, following IRS rules, I reported the 1099 amount on Schedule B but then deducted the amount that I had already paid. The H&R Block software understood what I was doing and gave me a correctly formatted Schedule B. Yet despite creating the Schedule B properly, the software still wouldn't let me file electronically.
So I pursued this issue through H&R Block Support, and they eventually sent me this message: We have gotten word back from our Development department and they are saying "The program is working as expected. The Schedule B US Savings Bonds adjustment for interest previously reported is required to be paper filed so the IRS can examine the return before accepting the return as properly filed. ".
Does this make sense to anyone? I have looked through various IRS publications but can't see anything anywhere that says they won't accept an electronic filing if there is a savings bond adjustment on Schedule B. I've asked the H&R Support people to send me a reference to support their statement to me, but have not heard from them.
At this point, I would be happy to file through another company like TaxAct or Turbo Tax, but don't want to run into this same problem. I?m basically trying to figure out if this problem is unique to H&R Block or if is an actual IRS requirement. Has anyone heard of the IRS refusing to accept electronic filing in this situation?
Reply to
Rick
"Unfortunately, you can?t e-file this year...This >> return
That's really weird because they get the exact same info on a paper return as they would on the E-File. Do you know of anything in the IRS regs or any IRS document that addresses this? I've done some searching but can't find anything.
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Reply to
Rick
Looking at Pub 550, it seems this is not the only situation where one needs to subtract previously reported interest.
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Form 1099-INT for U.S. savings bond interest.
... However, your Form 1099-INT may show more interest than you have to include on your income tax return. For example, this may happen if any of the following are true.
* You chose to report the increase in the redemption value of the bond each year. The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. [The original question]
* You received the bond from a decedent. The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return.
* Ownership of the bond was transferred. The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer.
... and more.
See also the Pub section entitled, not surprisingly, U.S. savings bond interest previously reported:
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Reply to
Mark Freeland
"Unfortunately, you can?t e-file this year...This > >> return
At this time of year, I don't have time to do research that doesn't benefit my paying clients. All I know is that putting the scenario into my tax software gave the same result. Since I trust my software provider is up on the rules, it must be in some authoritative publication (note that the usual IRS Pubs are NOT authoritative). You would have to look through the Regs, Notices, and Announcements.
Or just accept that you'll be paper filing this return.
Ira Smilovitz, EA Leonia, NJ
Reply to
ira smilovitz
in news:r30qpm$1a54$ snipped-for-privacy@gioia.aioe.org:
I haven't looked into the regs, but here's topic 19 in an IRS FAQ for tax preparers about the requirement to file most returns electronically. It's not extremely helpful, but it does give a little information on this:
Forms 1041QFT and 990T (when the exempt organization is a trust subject to tax on unrelated business taxable income under section 511 (b)) meet the definition of a return of income tax, but because these forms cannot be electronically filed at this time they are exempt from the e-file requirement, and do not count towards the 11-return threshold. This also includes amended income tax returns, such as Form 1040X, fiscal year returns for Form 1040, and fiscal year returns for Form 1041 for certain periods (i.e., fiscal year Form 1041 returns ending during any month after June 30 of the current processing year). See Notice 2011-26. In addition, some Forms 1040, 1040A, 1040EZ, and 1041 cannot be e-filed if they have attached forms, schedules, or documents that IRS does not accept electronically. However, if the form, schedule or document can be sent to the IRS separately using Form 8453 or 8453-F as a transmittal document, the rest of the return must be e-filed. Only the returns that cannot be e-filed are exempt from the requirement. See the instructions for Forms 8453 and 8453-F to identify which forms, schedules and documents apply. See Notice 2011-26. Finally, IRS is beginning to offer some capability to e-file returns for years other than the current tax year. Because this capability is limited for now, prior year returns are exempt from the electronic filing requirement at this time. There are some additional rare circumstances that can be found in Notice 2011-26, sections C1 and C2. For all of these returns, you do not have to request a waiver on Form 8944 or attach Form 8948 to the paper return.
Here's an article on this subject from 2014 - still, not very hepful but does give a little information:
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Reply to
Stuart O. Bronstein
"Unfortunately, you can?t e-file this year...This >> >> return
I think I've pretty much accepted that I will have to file manually this year. I always have a net payment anyway, so it's not that big a deal. But I was hoping to avoid the problem for the next couple of years, when I will likely be cashing in more bonds. And in 2022, all the remaining bonds (issued in 1992) have to be cashed in.
Thanks anyway, Ira - I appreciate your help and the info.
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Reply to
Rick
in news:r30qpm$1a54$ snipped-for-privacy@gioia.aioe.org:
Thanks, Stuart. None of that really directly relates to my situation, but it was interesting read.
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Reply to
Rick

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