K1 form losses

[Trey]

I have losses of $10,000 on a K1 from an LLC real estate investment partnership.  Unfortunately, these losses drop my AGI to below 100% of the federal poverty level--and because they drop me below that limit I no longer would qualify for Obamacare subsidies for my health care insurance premiums.  Can I chose to not claim the losses on a K1? If so, how would I do that in Turbotax? Or can I defer taking them to next year?

[Irene2805]

You need to claim the losses on your K-1.  However, you can only take the losses up to your basis in the LLC.  Anything over your basis is carried forward indefinitely until you acquire more basis.

Enter the amount of loss you are taking on line 1 of the K-1.  You will have to keep track of this yourself since TurboTax does not track basis.

[AmeliesUncle]

Did you receive any Advance credit (column C of the 1095-A)?

[convertibledreaming]

@Irene2805 - HELP!! (I can't see how to message you directly.)

I have a -$125,000 loss from a LLC K1, but  $72,000 cash income from freelance/property management work I've done.  No matter HOW I enter in the cash bank deposits, I'm still getting taxed the full amount.  How do I get my K1 to pass through and offset the gains I had in cash?  I want to be honest, but it kicks in a $10,200 tax bill if I report the deposits.  Why doesn't the extreme loss of my 3 member LLC still show a loss for my TOTAL taxable income?

[AmeliesUncle]

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@convertibledreaming wrote:

Irene 2805- HELP!! (I can't see how to message you directly.)

I have a -$125,000 loss from a LLC K1, but  $72,000 cash income from freelance/property management work I've done.  No matter HOW I enter in the cash bank deposits, I'm still getting taxed the full amount.  How do I get my K1 to pass through and offset the gains I had in cash?  I want to be honest, but it kicks in a $10,200 tax bill if I report the deposits.  Why doesn't the extreme loss of my 3 member LLC still show a loss for my TOTAL taxable income?

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@convertibledreaming 

Is the $125,000 loss for rental property (Box 2 of the K-1)?

Is the "freelance/property management" renting properties, or is that a "business" on Schedule C?

[ThomasM125]

A loss from rental activities would be limited, since that is a passive loss, only allowed to be used to offset against passive income, or up to $25,000 in some instances.

Also, you need to indicate that you "materially participate" in the activity and have money "at risk" in the activity. You will see those options as you work through the questions in the K-1 entry screens in TurboTax.

[convertibledreaming]

@AmeliesUncle,

The loss in from box 1 on the K1.  It's not in relation to rental properties. It's my husband and I doing a VERY SMALL car repair/dealership.  The cash that I'd like to report is from our number one customer who ended up having us repair his 3 properties and all vehicles. 

I've tried to use "bank statement" to add the amount and choose "freelance" work, but the K1 loss doens't counter balance that.  I removed that entry and tried to enter in a "business" in our own name/address in order to create a schedule C, but that didn't offset the K1 loss either.  

HELP!!?  

[MaryK4]

As it was explained previously, cannot use your loss from a K-1 to offset income from a Schedule C business UNLESS your basis in the K-1 is more than your losses an the basis is adjusted accordingly OR it was the final year you had an interest in the K-1 activity.

@convertibledreaming

[convertibledreaming]

@MaryK4 , 

how do I learn more about "UNLESS your basis in the K-1 is more than your losses an(d) the basis is adjusted accordingly"?

Where would a personal 1040 filing have the content on the "basis" of the LLC.  

[AmeliesUncle]

If you are not familiar with your Basis in the Partnership and keeping track of your Basis, you REALLY, REALLY need to go to a tax professional.

[Irene2805]

Your basis in the partnership is not calculated by TurboTax, nor is it tracked by the program.  It is something you (the partner) have to keep track of.

You might want to take the advice of AmeliesUncle and seek accounting advice, or see the IRS  Publication 541 -  Partnerships   The discussion of basis begins on the bottom of page 9.

[convertibledreaming]

@Irene2805  and @AmeliesUncle 

thank you! I found out that the way I entered in my income was triggering "self employment tax" on a schedule 2.  All I need to know is how to enter cash deposits that DONT require the self employment tax.  (It seems very counter-intuitive that the feds would ask for $10k+ when my AGI ended up at -$55k.)

I tried "freelance" with adding income via bank account.  After removing that I tried "home business" in my personal name which triggered the schedule C.

Is there any other way to show the deposits without getting the self employment penalty?

[Irene2805]

I hate to be a "buzzkill" but you need to report the income from your car repair business on a Schedule C and that will mean self-employment tax.  It's the price of doing business and helps pay for your Medicare and Social Security benefits in the future.

To get the K-1 loss to show as a nonpassive loss, delete the K-1 and then re-enter the information.  This will make sure TurboTax has the correct information.

As you go through the interview, make sure you do the following:

1. Mark that you are a General Partner or LLC Manager,.
2. Did you Participate?  Yes
3. On the second Describe the Partnership screen, mark the box that All of my investment in this activity is at risk.

The loss on the K-1 should now be considered nonpassive and will offset the income from your Schedule C business.