form 6198 what is it for?

i was employed for most of 2011 and mid year I did some consulting work on the side. I was also not reimbursed for my milage from the full time job so I entered the milage under the consulting business. I'm showing a loss on that income and the schedule c form is asking about about a loss statement on line 32. I have to check boxes a or b.
  • As to, "Form 6198 what is it for?

    here is an explanation off the IRS site: http://www.irs.gov/publications/p527/ch03.html#en_US_2010_publink1000219119

    "At-Risk Rules

    You may be subject to the at-risk rules if you have:

    A loss from an activity carried on as a trade or business or for the production of income, and

    Amounts invested in the activity for which you are not fully at risk.

    Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules.

    In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. See Publication 925 for a discussion of the at-risk rules.

    Form 6198.   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. "


    here is the form:  http://www.irs.gov/pub/irs-pdf/f6198.pdf

    here's the instructions: http://www.irs.gov/pub/irs-pdf/i6198.pdf
  • thanks, but that doesn't make any more sense to me than what turbo tax is telling me. i basically have unreimbursed mileage from my full time job, i'm a telecom consultant. it's not a risky job. how do I know if I check box a or b?
  • let me dig around...
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The IRS is trying to determine if the losses on Schedule C were, in effect, funded 100% with your own money.  If you paid for all the expenses out of your pocket, then all of that "investment" is at risk.

The Schedule C instructions provide more detail and illustrations..http://www.irs.gov/pub/irs-pdf/i1040sc.pdf
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