Why Isn’t TurboTax Showing My NOL Carryforward for Next Year?

[dalloelhadj0]

I incurred a significant business loss in 2024 and ultimately lost my business to the landlord due to unpaid debts and financial struggles. As a result, I filed for chapter 7 and have all debts discharged and on doing so lost over $225,000 of my initial investment in the business.

When filing my 1120S tax return, I reported the amount of money lost from the business disposal as a loss, since I did not receive any proceeds. On my Schedule K-1, this was recorded under Section 1231 as a business loss. However, when I entered my Schedule K-1 into my 2024 personal tax return, it offset all my taxable income, resulting in a total negative income of -$108,000.

My Concerns:

1. Impact of Negative Income:

   • With a negative total income, I’m concerned that it might negatively impact me, as it suggests I had no income for 2024.
   • Could this cause issues for financial support, loan applications, or other financial matters?

2. No NOL Carryforward in TurboTax:

   • Despite my negative total income, I do not see any Net Operating Loss (NOL) carryforward in TurboTax.
   • There is no indication of these losses being carried forward on Schedule D, Schedule C, or anywhere else in my tax return.
   • Is this a TurboTax issue, or did I make an error in reporting my losses?

I appreciate any guidance on whether I should expect an NOL carryforward and how to verify if TurboTax is handling my losses correctly. or Should I calculate and enter manually next years?
   From my understanding: 

• Since my income with negative AGI (-$108,035).
• Adding back my standard deduction (which was $29,200 for married filing jointly).
• The estimated NOL carryforward is: −108,035+29,200=−78,835-108,035 + 29,200 = -78,835−108,035+29,200=−78,835
  
  This is the amount I should carry forward to 2025 ?

[RobertB4444 · Accepted solution]

You reported your loss incorrectly.  The final 1120-S should have reported zero income and whatever regular business expenses you had for the year.  the only loss that you would have had reported on your K-1 would have been an ordinary business loss.  Or just plain zero if you didn't have any business expenses.  That is what would have carried over to your personal tax return.

The loss of your investment in the business would be entered as a sale of an investment.  It will result in a capital loss that you will carry forward for the next 20 years and be able to take a $3000 annual loss credit on your taxes against regular income or take the entire loss against any capital gains that you would have.  It's considered the loss of an investment, not a regular income loss.

That will not result in a negative income for you for the year based on the numbers that you provided.  

@dalloelhadj0 

[dalloelhadj0]

Hello RobertB4444

Thank you for your clarification. Based on your response, it seems I reported my loss incorrectly on my 1120S. I now understand I have a loss of investment instead of a sale of business.

To clarify some of my concerns to properly amend this, I want to confirm the following:

1. Since the loss of my investment in the business should be treated as a capital loss, I should report it as a sale of an investment on Form 8949 which should flow to Schedule D, rather than on Form 4797( which for sale of business that i initially reported).

2. On which tax form should I report the loss of my investment? Should it be included in the 1120S tax return, or should I report it on my 1040 personal tax return? in another word

   Are you saying that I should not have reported the loss of my investment on the 1120S at all and instead should have entered it in my 1040 personal tax return?

[ThomasM125]

You are correct, the investment loss is reported on form 8949, not Form 4797. The investment loss is reported on your personal tax return.

On the final tax return for the business, you should have reported the disposition of any assets. That may have resulted in a loss with respect to the assets, which would be reported on a Form 4797 on the S corporation tax return. The difference between the receipts and expenses of the business in the final year may have resulted in a loss as well, which you can reflect as a business loss on your personal tax return, from the form K-1 of the S Corporation.

Your basis in the business after it is closed is what you would report as a loss on investment on your personal tax return. Your basis would basically be what you invested in the company plus income from the business you reported as such on your personal tax return and minus losses from the business that you reported on your personal tax return. Also, you would subtract from your basis any money you withdrew from the business. That is the amount you would report as a loss on investment on your personal return and it would be reflected as a capital loss. It is available to be carried over to future years to offset capital gains and can be written of each year up to $3,000 in capital losses.