Question

Carryover of Unallowed Business Expenses to 2021

Forum|Forum|4 years ago
January 27, 2022
1 reply
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In 2020 we had a carryover of unallowed business expenses to 2021. Well that business shut down and we did not spend any money or make any money with that business in 2021. Can I still carry forward the unallowed business expenses on 2021 tax return? If so, how do I enter this into turbo tax? Thanks in advance

Jack

PatriciaV

Employee

Please clarify what type of business expense was disallowed, and confirm that the business with loss carryover was sold or dissolved.

According to the IRS, you may deduct in full any previously disallowed passive activity loss in the year you dispose of your entire interest in the activity (IRS Tax Topic 425 - Passive Activities - Losses and Credits).

In the case of excess expenses (like the Home Office Deduction), TurboTax will ask you about carryovers from last year.

In TurboTax, you enter the loss carryover under the activity that generated the loss. Look for a question like "I have activity losses carried over from last year." Check the box and TurboTax will ask you for the carryover amount later in the interview.

In the business info section for that activity, indicate that you closed, sold, or disposed of that business in the current tax year. TurboTax should release the loss carryover to be applied to your current year income.

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S

soberjack17Author

The business was dissolved. The Arkansas Tax website says it closed 24DEC20, but was not submitted or processed till 21MAY21. The loss shows up on Form 8829. Operating expense and excess casualty losses and depreciation. It was an LLC that my wife and I had and we each claimed a percentage of the business so we both have the carryover on 2020 taxes.

A

AmeliesUncle

@soberjack17 wrote:
The loss shows up on Form 8829.

It was an LLC that my wife and I had and we each claimed a percentage of the business so we both have the carryover on 2020 taxes.

Do you have another business? If not, carryover home office expenses don't go anywhere on your 2021 return.

However, you may have a bigger problem. If both you and your wife were part of an LLC in Arkansas, you should NOT have a 8829 at all. That business should have been reported as a Partnership, which is a completely separate tax return. You may consider going to a tax professional for a consultation about the potential ramifications of doing it incorrectly.