465 (d) carryover put my businesses into the negative and now I'm a high audit risk, how do I get rid of it?

[vivianrose84]

I was happy to see I was going to get a good refund this year, but then I got to the end of my taxes and it said I was a high audit risk, which it has never done before. So I looked at why. It listed several reasons, including that I filed a schedule C, but I file one every year and always come up as a low audit risk. So then it said that my business was operating at a loss, which confused me. I have two freelance businesses, and while I wouldn't say I make a good living off either of them, neither operates at a loss.

So I went back through the income section trying to figure out where I went wrong. I quickly realized it showed my business income at a $3,768 loss. So then I find the page where it lists both my businesses. It shows the first one with a gross income of $4,180 and a net income of -$10,478. Now, at that point I wondered how I could possibly have entered a number so wrong that that happened. Must be one hell of a typo! Because I had maybe $1,500 in inventory costs and other expenses. There's no way  I had a 10k loss!

So I dug around and found "Miscellaneous expenses" of more than $8,600. And I'm trying to figure out how I managed to type that in so wrong. And then I see this:

Your $6,831 section 465 (d) carryover has already been added to your expenses.

Huh?

So I look it up and it says it has something to do with carrying over losses from last year, only I didn't have any losses last year. How do I get rid of this? I never answered yes to any questions about losses.

[ThomasM125]

That is a passive loss carryover. It may have come from a loss in a year before last year that's been carried over until it could be used.

Probably what happened is that in a previous year you had a loss and indicated that you didn't have sufficient money "at risk" in the business to allow you to deduct the loss in that year. So it gets carried to the next year when you either have income to absorb it, or you become at risk for the money you have invested in the business.

If you don't want to deduct the loss, you can go back through the entries for that business, and when you see the at risk option, indicate that you are not at risk and the loss will not be allowed this year.

[vivianrose84]

I don't think I've ever claimed a loss on that business, but I will go find that question and make sure the box is unchecked. Thank you!

[vivianrose84]

Okay, I have unchecked this box three times, and it keeps rechecking itself, and I don't know why.

[DianeC958]

You may need to delete this form and put the information in again to have this box not checked.

How do I view and delete forms in TurboTax Online?

[vivianrose84]

Like, start my whole return over?

[MaryK4]

Also, you may want to see if you have any rental properties or K-1s.

@vivianrose84

[vivianrose84]

I followed the instructions on that link for deleting a form, although I'm still not sure what form I'm supposed to delete, but the option did not come up in the pop up box.

I will go through again and see if I somehow checked a box for rental properties or K1s.

[vivianrose84]

Okay, I've checked again and I STILL can't get rid of this checked box.