Single Member LLC - How do I carry forward losses from prior years to current year?

[tungher]

I have a single member consulting business LLC. For the last 3 years the income has been 

• 2024: $201,354 profit
• 2023: $25,098 loss
• 2022: $31,506 loss

Turbotax does not seem to be applying the losses from 2022 and 2023 to my 2024 tax filing? Where would i enter this information? Where can I check to see if any of the losses are being carried forward? 

Thank you 

[SharonD007]

When you operate a single member LLC (considered a Disregarded Entity by the IRS), there isn’t a difference between you and the LLC for tax purposes. The profits or losses generated by the LLC are reported on the Schedule C of your personal tax return, and your net income (when you have a profit) or losses are reported on your Schedule C and line 3 of Schedule 1. There's no carryforward of losses for a single-member LLC.

Please see the IRS link Single Member Limited Liability Companies for further details. Also, you can review the TurboTax linksLLC Tax Filing Rules, Limited Liability Company Taxes and What Is a Schedule C IRS form?.

[tungher]

Thank you! I didn't realize that the losses were already utilized on my 2022 and 2023 tax filings already. 

[mahimahimom]

Your prior year's losses, from your prior year's Schedule C,

go on your next year's Schedule C as:

SECTION 465(d) CARRYOVER

under Part II Expenses of Schedule C (Part I is Income).

Part II Expenses has a line 27 Other Expenses.

It in turn refers to line 48 also called Other Expenses.

That is where I put it under, the loss from prior year.  

And call it Section 465(d) Carryover.

For a one-member LLC.

[mahimahimom]

PS:  I mean "current year".

Last year's loss from your Schedule C goes as

SECTION 465(d) CARRYOVER

on Line 27 of your Sch C called Other Expenses (from line 48) where you will actually see the on your Schedule C of your tax return.

I believe I put it manually on there.

It is possible that TT pulls it in from last year.

But it is easy to check.

Just check last year's loss there after adding all the expenses and it is negative.

Then carry it forward.

All within one LLC of course.  Or DBA. 

[mahimahimom]

Go to Final Details at the bottom of the Business Income and Expenses page in TT.

Then click; Update.

On the update/next screen, click; I have at risk losses carrying over from 'prior year'.

Then click; Continue.

Then, click; Schedule C and the dollar amount.

Then that dollar amount should pop up on your Line 27 Other Expenses (from Line 48).

So more accurately, your dollar amount loss from last year should pop up on Line 48 in current year as:

SECTION 465(d) CARRYOVER

[mahimahimom]

You wrote:  

"There's no carryforward of losses for a single-member LLC"

But isn't that incorrect?

Last year's Schedule C loss,

Tentative profit or (loss). Subtract line 28 from line 7,

Let's say, is  $22,131

That 422,131 gets carried over onto this year's Schedule C

under "Other Expenses" under line 27 and 48 as

SECTION 465(d) CARRYOVER  $22,131

That number gets entered this year, so that is a form of "carryover", correct?

I am not sure how you can say that there is no carryforward of losses for a single member LLC, 

as though a single member LLC can't utilize its losses later (or sometimes earlier).

That's not true.

[tungher]

thank you mahimahimom - 

thank you for the detailed response. I am a novice, but I guess the question is even though my LLC had a loss in 2023, was that already somehow factored into my overall taxes which included W2 income? Bc its a single member LLC it uses my same tax number and ID so I don't actually know the answer

but I can go and try "I have at risk losses carrying over from 'prior year'" and see if it pulls the losses from last year or if I can enter them myself. 

Any additional insight is greatly appreciated.  Thank you. 

[dmertz]

You can't have the losses subtract from your overall individual income and carry over that same loss.  If you had an at-risk loss that carried over to the next year's schedule C, that loss would not be includible on Schedule 1 line 3 of the tax return for the year when the at-risk loss occurred.  Doing so would cause the amount of the loss to be excluded from income twice.

[mahimahimom]

DMERTZ, thank you for your response.

So DMERTZ, Question:

Let's say:

2020:  Schedule C: Line 29 Tentative profit or (loss). Subtract line 28 from line 7. . . . .. . . . . . . .   -30,000 (loss)

2021:  Schedule C: Line 29 Tentative profit or (loss). Subtract line 28 from line 7. . . . .. . . . . . . . . -20,000 (loss)

2022: Schedule C:  Line 29 Tentative profit or (loss). Subtract line 28 from line 7. . . . .. . . . . . .    -10,000 (loss)

2023: Schedule C:  Line 29 Tentative profit or (loss). Subtract line 28 from line 7. . . . .. . . . . . .     10,000 (profit)

Taxpayer has no other income.  

Taxpayer only has Schedule C (LLC/sole proprietor) income of respectively -30k,- 20k, -10k, 10k.

3 years of Schedule C losses - 1 year of profit.

I entered each prior year's loss on Line 48 in current year's schedule C as SECTION 465(d) CARRYOVER.

Then, for 2022 I entered the resulting negative number of -$60k of Line 29 of Schedule C

(Tentative profit or (loss). Subtract line 28 from line 7),

on Line 3 and Line 10.  

Line 3 of Additional Income and Adjustments to Income.

Line 10 of Additional Income and Adjustments to Income (Schedule 1).

That amount of -$60k then in turn appears on the Form 1040, Line 8, Other income from Schedule 1, line 10 .

In 2023, -$50k will show up on Line 8 of Form 1040.

That's how I have the Schedule C losses of 2020-2022 added up, and showing in 2022:  
As a sum of the prior years and the current year,

the losses eventually show up on Line 8 as a negative number in 2022.

Did I do it wrong, DMERTZ?

I fear I might have.

I carried over WITHIN the Schedule C on line 48, all prior year's losses.  

This is wrong, correct?

How should I do it? (There has been no other income than the Schedule C income).

Should I convert prior years' Schedule C loss which I added (as a sum) onto line 48 of current year's schedule C as the SECTION 465(d) CARRYOVER,

instead as an NOL on line 8a?

And forget about the whole 465(d) CARRYOVER on line 48 of Schedule C as I now have it?

TunaMom

[dmertz]

I was not saying that what was reported on your tax returns was right or wrong.  My point is only that you should not be able to carry the loss forward as a 465(d) carryover and in that same year use the loss to reduce in taxable income, since doing so would be subtracting the loss from income twice.  If the losses carried over from 2020, 2021 and 2022 as 465(d) losses were not also used to reduce taxable income in those years, then the result on your 2023 tax return would not be deducting the losses from income twice but would instead be reducing taxable income only on your 2023 tax return.  In other words, if the loss did not appear in Part I of your 2020, 2021 and 2022 Schedules 1, you would not be subtracting the losses twice.