I have a boat charter business and get a k-1 each year. We actively work the business and I’ve used TT on my Mac but it shows as passive-how can I change to active?

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February 21, 2025
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I have a boat charter business and get a k-1 each year. We actively work the business and I’ve used TT on my Mac (professional or home and business. From 2021-2024 TT has then classified the losses as passive not active thus generating a carry forward. I’ve talked to support about how to change that as I have to amend these taxes and they don’t know. How do I change from passive to active in the SW when it shows I’ve checked active participation? I’d like to hire someone to help if it can be done as I have to amend them.

PatriciaV

Employee

If you participated in the activity for more than 500 hours during the year, you are generally considered to have "material participation" that qualifies for non-passive income treatment. There are additional tests here: IRS Pub 925 - Material Participation.

While you can change your answer to the material participation question in the Schedule K-1 interview this year, you would need to amend prior year returns to make the change retroactive. Amending your returns would also affect the passive loss carryovers from those tax years.

You have three years from the date you filed your return or two years after you paid the tax due (whichever is later) to file an amendment. To file a new prior-year return for tax year 2023, 2022, or 2021, you'll need to purchase and download that year's TurboTax software for PC or Mac. Returns for tax years 2020 and earlier are no longer eligible to be filed through TurboTax.

This is a complex and tedious process, and you may consider upgrading to TurboTax Live, an online service that provides step-by-step guidance from a tax expert whenever you need assistance, either over the phone or by screensharing.

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pbroganmasonAuthor

Thanks for detailed response.

i do qualify and know that. And did check that in the K-1 as active participation. However that shakes on schedule c line 13 the depreciation. however on form 8582 part 1 this amount shows up as a passive loss. I’ll try again to change that. I have each years software on my computer but was unable to see how it “ended up” as passive when it is indicated as active. For 2021 per your info it is too late to change it.
Can I still change 2022 before the 2 year timeframe?

ThomasM125

The 2021 tax return was due in 2022, so you still have a month and a half to amend that return for a refund, as the three year limit applies to the due date of the return. The same applies for the 2022 return, you have until 2026 to amend it to receive a refund.

It is possible you are reporting the charter business as a rental activity on schedule E. If so, it would be by default a passive activity. However, since it is a short-term rental activity, it should be reported as a self-employment activity on Schedule C. If you report it that way, it should populate as a non-passive activity in TurboTax, assuming you indicate that you materially participate in it.

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AmeliesUncle

Is the K-1 from a Partnership (Form 1065)?

If so, is there an amount in Box 14 of the K-1?

If it a K-1 from a 1065, which box is checked for area "G" of the K-1?

Which box of the K-1 reports your income?

Did you indicate that you "Materially" Participate? That is different than "Actively" participate (although it is possible that TurboTax is using the wrong term).

Schedule C is not part of the situation. The K-1 shows up on page 2 of Schedule E.