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Is Net Operating Loss (NOL) Publication 536 for Single-Member LLC?

Forum|Forum|3 years ago
July 22, 2022
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I am using TurboTax Home & Business edition. There is a "Net Operating Loss is in the Business" item under Business section. Both the TurboTax help of the app and people in this TurboTax community point to IRS Publication 536 for calculating NOL but that publication is clearly saying that is for Individuals, Estates, and Trusts.

Question 1: How can this publication 536 apply to Single-Member LLC?

Question 2: If I have a loss of $100 reported in my 2020 Schedule C line 31 (Net Profit/Loss), is that mean I can carryforward this $100 loss in my 2021 tax return as NOL?

Thanks!

Best answer by Anonymous_

A single-member LLC (without an election to be treated as a corporation for federal income tax purposes) is disregarded for federal income tax purposes; it is treated essentially as a sole proprietorship and reports income and expenses on Schedule C.

A

Anonymous_Answer

Employee

A single-member LLC (without an election to be treated as a corporation for federal income tax purposes) is disregarded for federal income tax purposes; it is treated essentially as a sole proprietorship and reports income and expenses on Schedule C.

A

Anonymous_

Employee

You also need to calculate your NOL.

See https://www.irs.gov/publications/p536#en_US_2021_publink1000177330

Merely because you have a net loss on your Schedule C does not automatically translate to an NOL on your return. The net loss will, however, offset your other types of income.

Q

QPCAuthor

Thanks @Anonymous_ is that mean NOL is determined and calculated based on ALL of my other sources of income collectively, NOT only to one losing money?

A

Anonymous_

Employee

Yes, and that calculation is readily apparent by glancing over the worksheet.

M

Mike9241

an NOL applies at the taxpayer level, not the various items that make up the line items on the tax return which would include the reporting for a single member LLC.

example

taxable wage W-2 $50,400

loss schedule c - single member LLC -55,000

nonbusiness income 13,400

standard deduction - single -12,400

taxable income -3600

NOL is 3600

an individual's NOL should be computed using schedule A on form 1045

the short version is an NOL is the excess of business losses over business income reduced by the excess, if any, of nonbusiness income over nonbusiness deductions

business income w-2 $50,400 business losses schedule c -$55,000 net loss -$4600. but this is not your NOL because the nonbusiness income of $13,400 exceeds the nonbusiness deductions - the standard deduction of $12,400 by $1000 so the $4600 business loss is reduced by $1000 the excess nonbusiness income to arrive at your NOL of $3600.

while in this example the NOL was the same as taxable income this may not always be the case.