This is a reject code we are seeing come into support related to tax returns with a Schedule C.
“Reject Code: SC-F1040-007 | Category: Missing Document | Severity: RejectIf Schedule C (Form 1040) Line 33c checkbox ‘OtherClosingInventoryMethodInd’ is checked, then “Other Method Used To Value Closing Inventory Statement” [OtherMethodUsedToValueClosingInventoryStatement] must be attached.”
This reject is caused because preparers are accessing the “Question About the Operation of Your Business” page and selecting “Not Applicable” for “Method used to value closing inventory” but NOT also entering any values for any other field in the page most likely because it is not applicable to the return and also considered out of scope. This is creating a blank record in the e-file because the IRS is also looking for Page 2 of the Schedule C BUT this is not generated because no inventory values were provided within the Schedule C and Page 2 is not generated when it is not required.
- TIP: If there is no inventory related to the Schedule C, the “Question About the Operation of Your Business” page should be ignored as it is not applicable to the return.
IMPACTED RETURNS: For any return with a Schedule C that received Reject Code SC-F1040-007, go into the return, access the Schedule C and change the inventory selection back to “cost“. Continue out of the Schedule C to save then the return can be resubmitted.