It's more "situation" than "circumstance" and I'm not going to list all the variables here. But for a sole proprietor or single member LLC reported on SCH C as a part of your personal 1040 tax return, if the excess can be deducted from other ordinary income, then the program will "know" and make it happen. For a SCH C business, there are less situations where it can't be deducted from other ordinary income, and more situations where it can be deducted from other ordinary income.
For example, if depreciation on an asset in a year will be more than your business income in that tax year, that can't be deducted from other ordinary income. It's carried forward. But if something like the business expense of utilities (gas, electric, water, etc.) exceeds your business income, then that can be (and will be by the program) deducted from other ordinary income.
