I incurred a loss in my single member LLC. Turbotax is not showing loss but capping at $0. I thought business losses can be set off against other income. Please help.

[AnnetteB · Accepted solution]

Business income and expenses reported on Schedule C that generate an overall loss will offset other income shown on your tax return.

However, there are a couple of things to keep in mind if that loss is not being shown on your Form 1040. 

First, double check the information in your self-employed income section of your tax return to be sure that you entered that you “Actively participated in this work”.  Without active participation you will not be able to claim the loss.  This information can be found in the General Info > Other Situations section for your self-employed business. 

Second, if the loss is attributed to the business use of your home (home office), then it cannot be used to offset other income.  Instead, any losses due to your home office will be carried forward to future tax returns to offset your future business income.

[BCL]

Is this still true for 2019? I made sure that 'Actively participates' is 'Yes', and no this loss is not attributed to the use of a home office. All loss was the result of expenses being higher than income. Turbo Tax still shows a $0 for Net income, even though the expenses are substantially greater than income.

[VolvoGirl]

Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year.  And you have to answer yes to both questions about exclusive and regular use, not just one.  The area of your home office must be used regularly and exclusively for business to deduct it.

Or you checked the box on 32b saying Some Investment is Not at Risk.

If you have money not at risk you can not take a loss on schedule C. If you don't know what it means then probably All your Investment is at Risk (check Box 32a). It means you are using your own money for the business.  People usually check the wrong box.

[BCL]

It was the 'at risk' check box that was doing it. THANK YOU!!

[VolvoGirl]

Did you find how to change it?  That can be hard to find.

[BCL]

Yes, found it. Thanks!

[CCC7]

Same problem but I can not find where to change back.  Any help would be great.  Thanks

[VolvoGirl]

That is line 32.  If you don't know what it means then probably All your Investment is at Risk (check Box 32a). It means you are using your own money for the business.

Go to the Search box in the upper right and type in Schedule C

Then click on Jump to Schedule C

Click on Edit or Review by your Business name

Go to Uncommon Situations - click Edit or Start

Make sure the 5th box is NOT checked for "I have money invested in the Business that I'm not at risk of losing"  and probably check the None of Above Box.

then Continue

OR

Click on Federal on the Left side

Income & Expenses at the top

Self Employment (2nd item in  listing) click on Start or Show More/Start or Review

Click Review by your Business name

Scroll down to Uncommon Situations - Click Start or Edit

Make sure the 5th box is NOT checked for "I have money invested in the Business that I'm not at risk of losing" and probably check the None of Above Box.

then Continue 

[kittycolby]

So very frustrated. I am a daycare provider. I have incurred a loss on business. Schedule C. However Turbox tax is capping me at zero. Apparently it has for the last two years..,When I review my forms before filing- it does not have box 32a checked. Not sure where to go to do that. 

[FangxiaL]

Try this to resolve the issue:

1. Go to Your 2021 self-employed work summary, click on Edit next to your Line of work
2. Click on Edit next to General info, at the bottom of the next screen, click on Edit under Other situations 
3. Make sure that you did not accidentally check the box I didn't actively participate in the operation of this business.

@kittycolby

[nancynwong1]

I have the same problem with Turbox cap at $0 profit instead of a loss.  I did check and it's showing I am Actively participated in this work. but it doesn't change the cap.  how do i fix it? or Turbo tax doesn't allow you claim loss at all.  that's wrong. anyone can help?

[FangxiaL]

Check to see if the loss is generated partly by home office deduction. You cannot take a home office deduction if it would cause your business to operate at a loss. You can deduct home office expenses up to your net income (revenues minus other expenses) and carry over the rest to the following year. 

@nancynwong1
 

[VolvoGirl]

Did you check schedule C line 32?  Is not the one for Actively participated.  Line 32 is for money at risk.

If you are not showing a loss on Schedule C.
Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year. And you have to answer yes to both questions about exclusive and regular use, not just one. The area of your home office must be used regularly and exclusively for business to deduct it.

Or you checked the box on 32b saying Some Investment is Not at Risk.

[FangxiaL]

If a home office is not the problem, please check how you answered the questions when you entered your self-employment income and expenses. See screenshots below:

@nancynwong1