Past year loses

[watergirl2]

Hello 

In 2020 my business has 10k expenses and no income. I pass through the 10k but there was no or little personal income either. So the business expenses (business losses) didn't reduce any tax liability.

In 2021 I had the same situation. about 12k in expenses and no business income. This year I got a job and do have personal income and personal federal and state taxes. I will pass through the 12k. 

Should the 2020 business expenses carry over to the new year? 

Thank you
WG

[DawnC]

No, they will not, not automatically anyway.  In 2020, you had a net operating loss.  TurboTax does not calculate these losses or deductions.    See page 14 of Deductions & Adjustments to income not covered elsewhere.   

If after completing your tax return you have a negative amount on Form 1040, line 15, and you had a loss from a business activity such as those reported on Schedules C, E, F, or resulting from dispositions on Form 4797, or sustained a casualty loss, you may have a Net Operating Loss (NOL).   The program does not calculate the amount of NOL to be carried back or forward to another year.    To determine your NOL, if any, refer to Form 1045, Schedule A (not included with this program).   You will probably also benefit by reviewing IRS Publication 536 for details about the NOL calculation.

This publication discusses NOLs for individuals, estates, and trusts. It covers:

• How to figure an NOL,

• When to use an NOL,

• How to claim an NOL deduction, and

• How to figure an NOL carryover.

There is a place in TurboTax to enter your net operating loss carryforward amount, but you have to calculate yourself.   Search for nol in TurboTax.  There will be a Jump to nol link to take you to where you enter these amounts.  

The CARES Act made three changes to NOLs that improves cash flow for struggling businesses:

• Provided a five-year carryback for losses earned in 2018, 2019, or 2020, which allows firms to modify tax returns up to five years prior to offset taxable income from those tax years.
• Suspended the NOL limit of 80 percent of taxable income. This means that firms may deduct their NOLs to eliminate all of their taxable income in a given year, instead of having to carry forward any NOL beyond 80 percent of taxable income.
• Pass-through business owners may use NOLs to offset their non-business income above the previous limit of $250,000 (single) or $500,000 (married filing jointly) for 2018, 2019, and 2020.

For an NOL arising in a tax year beginning after Dec. 31, 2019, and before Jan. 1, 2021, an election must be made by no later than the due date, including extensions, for filing the taxpayer’s federal income tax return for the tax year in which the NOL arises. The election is made by attaching a statement to the return.

[watergirl2]

Is there a service I can use to figure this out? Seems too complex for me but it could be a significant amount that I can save if I have the opportunity. 

[AliciaP1]

You may want to contact a tax professional in your area to help you out with this.  It is a pretty complex situation and TurboTax Business does not offer a service to calculate this for you.