forwarding loss

[Anonymous]

how can i carry loss from last year it was for business set up, about $16000

[TaxGuyBill]

You need to provide a lot more details, such as what software you are using, what created the loss, why it was not able to be used, and more.  The more details you can provide, the more likely someone would be able to help you.

[Anonymous]

Ok I’m using qbonline, the guy started his business on oct/19, it was a startup expense he signed up with qb on Jan/20. 
My question is how much can I forward from the loss which is 16000 to 2020 by the way his net income is 55000 the other question what tool can I use is journal entry fine or there’s a better way. 
  Thanks

[qbteachmt]

"the guy started his business on oct/19, it was a startup expense"

Use the IRS for your resource. Get Pub 535 for 2019, Chapters 7 and 8 help you understand start up costs, for what is and is not Loss. Don't confuse Spending (cash flow) and Loss or Expense.

"he signed up with qb on Jan/20."

If you are doing the 2019 taxes and he was in business in 2019, then you use Pub 535 that is labeled for 2019 tax returns, to file the 2019 taxes.

"My question is how much can I forward from the loss which is 16000 to 2020"

Filling in the tax return will help you what is carried forward.

"by the way his net income is 55000"

Is that for 2020? You stated "net" but is this before you have worked on his tax return? An operational Net isn't the end result. You will need to review what they are reporting and how they categorized it.

"the other question what tool can I use is journal entry fine or there’s a better way." Yes, there will be some entries to make, such as the Capitalization and Amortization for the tax year. Yes, that is typically done via journal entry for the Bookkeeping entries from the tax reporting. If this is a QB question, you don't use journal entries for anything where names or products and services are part of the adjustment.

[TaxGuyBill]

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@Anonymous wrote:

Ok I’m using qbonline,

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This forum is for tax professionals that prepare tax returns.  If you are not a tax professional preparing a tax return, you are on the wrong website.

And for both tax purposes and accounting purposes, your questions still does not make sense as to why anything needs to be carried over.

[qbteachmt]

@TaxGuyBill 

hammad is a new tax preparer, as well as trying to work with QB customers. I keep pointing him to the QB forum for QB questions and tasks. But his tax issues are best handled by finding a local CPA to mentor him, don't you think? Everything he asks about taxes indicates he's trying to figure it out by looking at the Forms and not understanding that the fields on the forms are filled in by an Informed tax preparer according to IRS regulations that apply. That's why you take continuing education classes and work with a mentor = to learn. Asking an end user community to help you use the program to make an entry you already know all the details of, is different than still learning the ins and outs of the tax regulations. And as a consultant, I have learned that you cannot "call it what the client called it when they told me" because they are not the tax professional and they do not know the regulations.

Someone might have "spent" $16,000 to get their business off the ground. That doesn't make it Expense for the bookkeeping or for the tax return filing. You have to know what they used their cash flow for, and that might fall under many different categorizations.

[Anonymous]

Thank you for your support and understanding, and I went to where you pointed me, but I thought because I'm his accountant I have to get every thing ready for his tax preparer, I don't want his tax preparer to make fun of me and say who messed up your books, I bought a tax return from pro connect, and it's doing all the work for me at least this is what I thought, I've been looking all over for private tax teacher, or a mentor, with no result, until today, I found out about Udemy, where they have plenty of classes, for a really cheap price, so I'm going to continue on learning, until I get better.

I really appreciate your kindness, and patience with me, by the way I'm she not he.

Big thanks to people like you

[TaxGuyBill]

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@Anonymous wrote:

I'm his accountant I have to get every thing ready for his tax preparer,

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For the income tax preparer, what we need from the bookkeeper/accountant is what only happened in the CURRENT year.  Any income TAX carryover losses, we should be able to figure out based on the prior income tax return. 

So again, all we need from the bookkeeper is the CURRENT year information, so you don't really need to worry about stuff from the prior year.

Does that help at all?

[Anonymous]

Thank you at least I don't have to keep thinking about it again, but as long as you mentioned it, does this mean I'm not suppose to do depreciations and home office calculations.

Thanks again

[qbteachmt]

"I don't want his tax preparer to make fun of me and say who messed up your books, I bought a tax return from pro connect, and it's doing all the work for me at least this is what I thought"

Ah; no Program does all of the work for us. It's just a tool. We have to understand how this tool can be used. I use this example in my class: I give you a Hammer. You can build a doghouse or a hospital. You need to learn how to build the difference. The hammer is just a hammer.

A good tax preparer will be the best guide for you and work with you. They won't think it's Messed up; they should review with you when something is not put into the right account type, such as what is or is not Expense, so that you learn from them.And working with different tax preparers and CPAs means you will learn different ways to do the same thing; that part is like cooking; every chef is different.

But now you are in between the client and the tax preparer, and you want to learn to do it properly, then you must convey to your client the sensitive issues, such as, "This amount you Spent, we won't be putting it as Expense, because you Invested it and the tax regulations don't allow you to write it off all at once. The rules allow (yada yada yada) and we want to treat it per the regulations that apply."

Working stuck between what the Client wants and what the CPA tells you is Allowed, is why you will earn the big money 🙂

"and patience with me, by the way I'm she not he"

Me, too! And the reference I gave you. You never know, on the internet.

"so you don't really need to worry about stuff from the prior year"

Which means, you don't "put" a loss anywhere. You track the details which will show a loss or gain or whatever the data shows.

[qbteachmt]

"does this mean I'm not suppose to do depreciations"

Let the tax preparer figure out these values and provide them back to you to enter. You give them a listing of Assets placed in service and removed from service and sold or disposed of. They figure out which rules apply for the year of the activity and based on the history of the items. For all you know, something might be fully depreciated or taken as expense, previously.

"and home office calculations."

Don't do these unless and until you know it applies. For instance, all these people whose employer has them working from home, they don't qualify for Home Office on their taxes.

Here's how I learned: make a check list for that type of Business Entity (sole proprietorship, LLC, S Corp, C Corp) for things you know you would chase down. I describe year end like this: There are a bunch of things you only do at year end, and you don't do again until the next year end. That makes it three years out before you might even remember what it is you are supposed to be doing about it. And by then, Congress changes the regulations.

[Anonymous]

you're absolutely right and that's a good plan.

Thanks again

[Anonymous]

Thanks, so all what I should worry about is transactions from the current year, got it.

Big thanks

[qbteachmt]

"so all what I should worry about is transactions from the current year"

Let that CPA/tax preparer guide you for what is called Opening Entries, if the QB data is a new bookkeeping file. That's who needs to guide you for getting this up and running.

[TaxGuyBill]

If the tax preparer did not prepare last year's tax return, they MIGHT also need a list of all depreciable assets from prior years, along with the date each asset was "placed in service" and the Basis (usually the cost).

Ideally, that information should be on a worksheet with the previous tax return, but sometimes it is not included, in which case they may need the information about the depreciable assets from you.

[qbteachmt · Accepted solution]

That's assuming a 2019 was already prepared. And this discovery process is part of supporting your client. I call it "playing Sherlock Holmes."