Single Member LLC NOL Carryforward

[ElizabethP47]

My question is a multi-level question.  My husband owned and operated a trucking business for a number of years - each year we showed a NOL.  He exited the trucking business a year ago so 2023 was his first W-2 year in quite some time.  I am not familiar with how to show the NOL from prior years on the tax return using TurboTax.  It is also my understanding from reading the tax code that we can only use 80% of our W-2 earnings as an offset to the NOL carryforward that he has.  Does TT do this automatically for you?  I just want to make sure that we are accounting for the NOL correctly and getting the full benefit of earning no money during those years he had the trucking business.

Thank you, in advance, for your help!

[tagteam]

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@ElizabethP47 wrote:

Does TT do this automatically for you? 

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No, TurboTax does not figure your NOL automatically nor does it carryforward an NOL. You need to calculate the NOL manually and then enter it into TurboTax (see screenshot).

https://www.irs.gov/publications/p536#en_US_2023_publink100097938

[ElizabethP47]

This is very helpful.  Thank you.  Can I take the NOL's from prior years (all from the same business) and carry those forward or do I need to go back and amend the prior year tax returns in order to do that - as the carryforwards would be substantial (between $10k - $30k each year) or would you suggest just using the last three years?  I don't want to create more work for myself but at the same time want to reap some of the benefit of what we went through while he had these grandiose dreams of being a successful truck driver.

[tagteam]

Read through the IRS publication at the link below.

https://www.irs.gov/publications/p536

Note that NOLs that arise in tax years after 2020 can only be carried forward. 

I'm going to page Champ @Mike9241 to see if he has any additional input.

[Mike9241]

we can't see your returns. just because there was a business loss does not mean there was an NOL because other items of income must be taken into account and thus the business loss could have been completely used up every year by other income.  Such a scenario is possible. Somehow even with the losses year after year  you managed to support yourselves so the money had to come from somewhere. 

I highly recommend seeking the advice of a tax pro who can look at the actual numbers and review the laws that existed in the years the business had a loss. one possible issue is if this was a hobby

because losses from hobbies are not allowed. The IRS presumes that an activity is engaged in for profit if it shows a profit for at least 3 out of 5 consecutive years. With losses year after year, it would seem you did not meet the 3 of 5 test. That this is a hobby can be rebutted if the iRS audits should the issue come up. 

[ElizabethP47]

I use TT Desktop - thus you can't see the returns.  I understand about the IRS thinking this must be a hobby but you are also assuming that he was the only one working.  I was supporting the family while he was out trying to earn a wage driving a truck.  By the time everything was taken into account, we showed operating losses.  In trucking there are a lot of non-cash items that have to be taken into account and that is what ate up anything that could have been considered income.

I will just be conservative and see what I can do.  Thanks.