As a new business owner who's been lurking in this community for a while, I finally decided to create an account after reading through this incredibly helpful discussion! I've been putting off dealing with my NOL situation because it seemed so overwhelming, but everyone's explanations have made it much clearer. I'm in a similar boat to many of you - had losses in my first two years of operations (2022-2023) totaling about $28,500, and I'm finally profitable this year with around $41,000 in revenue. After reading through all the sequential calculation explanations, I think I understand that my current year expenses get deducted first, then I can apply up to 80% of whatever's left toward using my NOL carryovers. What's really exciting is realizing that I should be able to use most or all of my carryover this year since the 80% limit would be much higher than my actual NOL balance. The strategic planning insights about expense timing and even the Roth conversion opportunity that @Ashley Simian mentioned have given me so many new ideas for optimizing my tax situation. One question I have - since my NOL years were 2022-2023 (post-2020), they would be subject to the 80% limitation, right? I want to make sure I'm not missing any of the special rules that apply to different time periods that were discussed earlier in the thread. Thank you all for creating such a welcoming and educational community. I'm looking forward to participating more and hopefully helping others as I learn!

This has been such an incredibly comprehensive and helpful discussion! As someone who's been struggling with NOL calculations for my small consulting business, reading through everyone's explanations has finally made the 80% limitation rule click for me. The key insight that really helped was understanding the sequential approach - first calculate your current year taxable income (including all regular business expenses), then apply the NOL carryovers up to 80% of that remaining amount. I was definitely making it more complicated by trying to apply limitations to everything at once. What I found particularly valuable were the practical planning strategies discussed here - the expense timing considerations, the estimated tax payment implications, and even the Roth conversion opportunities. These are the kinds of real-world applications that you just don't get from reading IRS publications alone. I have about $31,000 in NOL carryovers from 2021-2022 and expecting around $48,000 in profit this year. Based on all the calculations shown in this thread, I should be able to use my entire carryover since 80% of my taxable income (after current expenses) should easily exceed $31,000. One thing I'm curious about - has anyone dealt with NOL situations where you have losses from multiple business activities? I do some freelance work in addition to my main consulting business, and I'm wondering if NOLs can offset income across different business activities on the same tax return, or if there are any limitations there. Thanks to everyone who shared their knowledge and experiences. This community is amazing for navigating these complex tax situations!

I just wanted to chime in as someone who struggled with this exact same issue! Line 11a was definitely the most confusing part when I first tried manual filing. What really helped me understand it was realizing that the IRS has already done all the complex bracket calculations for you in those tax tables. You're not expected to manually figure out that X amount is taxed at 10%, Y amount at 12%, etc. - the tables have all that math built in. One tip that saved me time: before you even look for your income in the tax tables, double-check that you're looking at the right table for your filing status (Single, Married Filing Jointly, etc.). I spent way too long looking at the wrong column my first time! Also, if you have any doubt about which method to use (tax tables vs worksheets), the instructions usually have a flowchart near the beginning that walks you through it based on your specific situation. That flowchart was a lifesaver for me when I wasn't sure if my dividend income meant I needed a special worksheet.

I'm jumping in as someone who went through this exact confusion just last month! Line 11a was definitely the part that made me question whether I should just give up and use software instead. What finally clicked for me was understanding that the tax tables aren't just random numbers - they're the result of all those complex progressive tax bracket calculations that the IRS has pre-computed for you. So when you look up your taxable income and see a tax amount, that already accounts for the fact that your first chunk of income is taxed at 10%, the next chunk at 12%, and so on. I'd also recommend double-checking which tax table you're using if you're married - I initially used the Single table by mistake and was wondering why my tax seemed so high! The filing status makes a huge difference in which column you look at. One last tip: if you're really unsure, the IRS instructions usually have examples worked through step-by-step. I found those examples super helpful for seeing exactly how someone with similar income would fill out line 11a. Good luck with your first manual filing - it's actually pretty satisfying once you get through it!

Has anyone used the automatic meal tracking in QuickBooks for S-Corps? I'm trying to figure out if it correctly handles the 50% deduction for meals or if I need to manually adjust things. Every time I categorize something as a meal expense it doesn't seem to be doing anything special with the 50% rule.

I've been handling S-Corp taxes for several small businesses and this meal deduction issue trips up almost everyone. Here's what I always tell my clients: The key thing to remember is that you're essentially doing two separate things: (1) recording the legitimate business expense, and (2) noting the tax limitation. So yes, report the full $6,300 on line 20 of the 1120-S, then add back the nondeductible $3,150 on Schedule K, Line 16c with code "C". One tip that might help - keep really detailed records of each meal including who attended, the business purpose, and the amount. The IRS is pretty strict about meal deductions and having good documentation will save you headaches if you ever get audited. Also make sure you're distinguishing between different types of meals since some have different rules (like meals during travel vs. office meals vs. client entertainment). The nondeductible portion will flow through to your brother's K-1 and effectively increase his taxable income from the S-Corp, but it's not like he pays "extra" tax on it - it's just that the business gets less of a deduction than the actual expense incurred.

Miguel, don't feel embarrassed at all - partnership taxation is genuinely complex and your questions are spot on! I went through this exact same confusion when our small consulting group formed an LLC. You're absolutely right that you'll file Form 1065 and each partner will get a K-1. When you file your personal 1040, the K-1 income/loss goes on Schedule E (Supplemental Income), NOT Schedule C. This is a crucial distinction - Schedule C is only for sole proprietorships. For those business expenses you mentioned (car, equipment), here's what I learned: these should be handled at the partnership level on the 1065, not on your personal returns. The partnership takes the deduction, then your share of the reduced profit flows to your K-1. If you've already paid for business stuff personally, you have two clean options: 1. Have the LLC reimburse you (with receipts and documentation) 2. Treat it as a capital contribution to the partnership Either way, the deduction happens on the 1065. Don't try to deduct business expenses on your personal return while also reporting K-1 partnership income - that mixes two different tax treatments and can raise red flags. My biggest recommendation: set up an expense reimbursement policy in your operating agreement ASAP. It'll save you headaches down the road and create the paper trail you need for tax compliance.

I just went through this exact situation with my 4-member LLC last tax season and wanted to share what worked for us! The learning curve is steep but totally manageable once you get the basics down. First, you're on the right track with Form 1065 and K-1s. Each partner reports their K-1 income on Schedule E of their personal 1040 - definitely NOT Schedule C. I made that mistake initially and had to amend my return. For business expenses paid personally, we developed a simple system: anything under $100 gets submitted monthly for reimbursement with just a receipt and quick description. Larger expenses need pre-approval via our group chat. The LLC reimburses within 30 days and takes the deduction on the 1065. One thing that really helped us was opening a dedicated LLC business account and credit card right away. It makes tracking partnership expenses so much cleaner than trying to sort through personal purchases later. Also, don't stress too much about getting everything perfect in year one. We made some mistakes with expense categorization and documentation, but we learned from them and tightened up our processes. The important thing is establishing good habits early and being consistent about separating partnership business from personal finances. Your friend group LLC sounds like it's starting off on the right foot by asking these questions upfront!

I dealt with this exact situation when I closed my failed e-commerce LLC two years ago. You can definitely deduct those business losses against your personal income - the key is making sure you have proper documentation for every expense. One thing I learned the hard way is that the IRS pays extra attention to business loss deductions from dissolved entities, so organization is crucial. Beyond bank statements, you'll want receipts, invoices, contracts, and anything that proves the business purpose of each expense. Also consider the timing of your dissolution carefully. If you dissolve before filing taxes, you might face additional scrutiny and documentation requirements. I'd recommend keeping the LLC active until after you file your return for this tax year. The good news is that legitimate business losses can significantly reduce your tax liability. My $11k in losses from my failed venture ended up saving me about $3k in taxes when applied against my W-2 income. Just make sure your tax professional reviews everything thoroughly - it's worth the extra cost to avoid potential issues down the road.

I've been through this exact scenario with my marketing consultancy LLC that I dissolved last year after accumulating about $12k in losses. The good news is you can absolutely deduct those business losses against your W-2 income even after dissolving the LLC. A few key points from my experience: **Documentation is critical** - Bank statements alone won't cut it. The IRS will want to see receipts, invoices, contracts, and clear business justification for each expense. I recommend categorizing everything by expense type (office supplies, software subscriptions, marketing costs, etc.) to make your CPA's job easier. **Timing matters** - Consider keeping your LLC active until after you file your tax return. I dissolved mine too early and it triggered additional IRS questions that delayed my refund by several months. The extra few months of minimal state fees were worth avoiding the headache. **The tax savings are real** - My $12k in losses reduced my taxable income dollar-for-dollar, saving me about $3,200 in federal taxes (I'm in the 26% bracket). Since you're well under the $289k excess business loss threshold, your full $13k should be deductible. Work with a qualified tax professional who has experience with business dissolutions - they'll know exactly what documentation the IRS expects and can help you avoid common pitfalls that trigger audits.