Can I carryforward a Schedule C loss to next year if I had zero income this year?

Thanks for this info! Would you happen to know if there's a limit to how much of the loss I can apply each year? Like if I had a $10k loss this year, can I use all of it next year or is there some percentage limit?

The NOL deduction is generally limited to 80% of your taxable income in any given year. So if you had a $10k loss this year and next year you earn $15k in taxable income, you could offset up to $12k (80% of $15k) with your NOL carryforward. For the QBI loss carryover specifically, it will directly reduce any QBI you have in the following year before calculating your QBI deduction. There's no percentage limitation on that particular carryover.

Does it work with all tax software? I use TurboTax and wondering if the instructions from taxr.ai would be compatible or if I'd still be confused.

I'm skeptical that an AI can really understand complex tax situations. Did you verify the info with an actual accountant? Tax mistakes can be expensive.

It's completely software-independent - they just explain the tax concepts and which forms you need. I used their guidance with TurboTax without any issues, and everything transferred over perfectly. The explanations were actually clearer than what TurboTax provided. As for verification, I did actually run it by my friend who's a CPA afterward, and he confirmed everything was correct. He was actually impressed by the detailed explanation of how the NOL carryforward interacts with the QBI loss carryover. The AI even caught a nuance about business loss limitations that applies to certain situations.

How does that even work? The IRS phone system is such a nightmare, I can't imagine how a service could actually help with that.

Sounds too good to be true. Are you sure this isn't just another scam trying to get access to people's tax information? I've been burned before by "helpful" tax services.

It's actually pretty simple - they use a system that waits on hold with the IRS for you. When an IRS agent picks up, they connect the call to your phone. You don't share any tax information with them at all - they're just holding your place in line. I was skeptical too, but it's completely legitimate. They don't ask for any sensitive information - just your phone number so they can call you when the IRS agent is ready. I understand being cautious with tax stuff, but this service is just about connecting the call, they don't have access to any of your personal information or tax details. I've used it twice now and spoke directly with IRS agents both times.

Thanks for mentioning this! I'm still confused about one thing - if I have both a Schedule C loss and a QBI loss carryover, do they get handled differently or are they essentially the same thing for tax purposes?

Your Schedule C loss becomes part of your Net Operating Loss (NOL) calculation, which follows the rules I mentioned with the 80% limitation when you use it in future years. The QBI loss carryover is handled separately under the Section 199A rules. It directly reduces any qualified business income you have in future years before you calculate your potential QBI deduction. They're related but tracked and applied differently on your tax return.

This is so important! The hobby loss rule basically says if you don't show a profit in 3 out of 5 consecutive years, the IRS might consider it a hobby. Then you're really out of luck with those losses.

This is really helpful advice! I'm curious about the documentation part you mentioned - what specific records did you find most important to keep? I'm worried I might not have been thorough enough with my record-keeping this year since I was so focused on just trying to keep the business afloat. Did the IRS actually ask you for detailed explanations when you carried the losses forward, or was it more of a precautionary measure?

Great question! For documentation, I kept receipts for all business expenses obviously, but also things like bank statements showing business transactions, any contracts or agreements (even failed ones), marketing materials, business correspondence, and a simple log of business activities and time spent. The IRS didn't actually audit me, but when I carried forward losses for the second year, my tax software flagged it for review and I had to provide some additional documentation to support the business nature of the expenses. Having everything organized made that process much smoother. One thing I wish I'd done better - keep a written record of your business plan and how you intended to make money, even if it didn't work out. That really helps establish legitimate business intent versus hobby classification if questions ever come up.

Great questions! For the first part - yes, you can absolutely use NOL carryforwards from one type of business to offset income from a completely different business. The IRS doesn't require the losses to be from the same business activity. Your consulting losses can offset future e-commerce income, W-2 wages, or any other type of taxable income (subject to the 80% limitation). As for the partial year operation, that actually doesn't create any special complications for NOL purposes. Whether your business was active for 6 months or 12 months doesn't matter - what matters is the total net loss you incurred during the tax year. Just make sure you're only deducting legitimate business expenses that occurred during the time you were actually operating. One thing to keep in mind when starting your new e-commerce business - consider keeping it as a separate legal entity or at least maintain very clear records to distinguish it from your old consulting business. This will make your bookkeeping much cleaner and help avoid any confusion if the IRS ever has questions about which expenses relate to which business activity.

Thanks for bringing up the at-risk rules - that's something I hadn't considered! I'm in a similar boat with a failed tech startup this year. Most of my losses were from legitimate business expenses I paid out of pocket, but I did have a small business loan that I used for some equipment purchases. Do you know if that would trigger the at-risk limitations, or is it mainly an issue with larger borrowed amounts? Your spreadsheet idea is brilliant too. I've been trying to keep track of everything in my head but having it organized separately for NOL vs QBI carryforward would definitely make next year's filing much smoother. Did you find any good templates or did you just create your own columns? It's oddly comforting to hear from others who went through similar struggles this year. Hoping we all bounce back stronger next year!