Form 4562 Carryover of Disallowed Section 179 Deductions - What Happens with Business Loss Years?

Thanks for explaining this! I've got a follow-up question - do you have to keep filing Form 4562 every year even during the loss years just to maintain the carryover, or can you skip filing the form in years where you know you can't use any of the deduction due to the business income limitation?

Yes, you should complete Form 4562 every year when you have active Section 179 carryovers, even in loss years. This maintains a clear record of your carryover amount and ensures the IRS can follow your deduction trail. You don't need to file Form 4562 in years where you have no new Section 179 property AND no carryovers from previous years. But in your situation, since you have existing carryovers, you should complete the form to properly track these amounts until they can be used.

How does it handle multiple businesses? I have two Schedule C businesses and I'm constantly messing up which Section 179 carryover belongs to which business. Does it keep them separate?

I'm a bit skeptical about this... does it actually prepare the forms for you or just give advice? I've been burned by tax tools before that seemed helpful but then just pointed me to generic advice without solving my specific situation.

It absolutely handles multiple businesses separately! The tool recognizes different Schedule C businesses and keeps track of the Section 179 carryovers for each one individually. It even color-codes them to help you visualize which deductions belong to which business. The tool does both - it provides specific advice tailored to your situation and also shows you exactly how to fill out the forms correctly. It's not just generic advice; it analyzes your actual tax returns and identifies the specific line items and values you need to enter on your current forms. It showed me exactly where my carryover amounts needed to go on Form 4562 and on my Schedule C.

Wait, so this service just gets you through to an actual IRS person faster? How does that even work? The IRS phone system is a nightmare by design, so I'm having trouble believing this is legit.

Sounds like a scam tbh. Nobody can magically bypass IRS hold times. Plus, why would you need to talk to an IRS agent about this anyway? The rules for Section 179 carryovers are clearly spelled out in the instructions. I'd be very careful about services claiming special "access" to the IRS.

It's not magic - they use technology that navigates the IRS phone system and holds your place in line. When they reach an agent, they call you and connect you directly. No bypassing required, they just do the waiting for you. I needed to speak with an agent because my situation was more complex than what's covered in the basic instructions. I had received a notice questioning my carryover claims across multiple businesses with loss years, and the written instructions didn't address my specific scenario. Getting clarification directly from the IRS gave me peace of mind that I was handling everything correctly.

Thanks for this clear explanation! Quick question - how does this work if we have multiple Section 179 assets with different carryover amounts from different years? Do we need to track each asset separately, or can we just carry forward the total combined amount?

You should track each Section 179 asset separately in your own records, including purchase date, cost, amount deducted each year, and remaining carryover. This detailed tracking is essential for your own documentation. However, on Form 4562 itself, you'll report the combined total carryover amount from the previous year on line 13. The form doesn't require you to break down the carryover by individual assets - just the total disallowed amount from the previous year's form. But maintaining your own detailed asset records is crucial, especially if you later dispose of an asset and need to calculate recapture amounts.

I use TurboTax Self-Employed and it does track the Section 179 carryovers between years IF you use the same software version each year and transfer your previous year's return. But if you switch products or don't import last year's return, you'll need to manually enter the carryover amounts. The problem I've found is that TurboTax doesn't make these carryovers very visible or explain them well. I actually missed a carryover one year because I didn't realize I needed to manually enter it after switching from CD to online version.

This is incredibly helpful! I'm new to dealing with Section 179 carryovers and had no idea about the FIFO rule. So if I understand correctly, if I have that $570 carryover from 2022 and then create a new $300 carryover in 2025, when my business finally has enough income in 2026 to use some of these deductions, I have to apply the $570 first before I can touch the $300 from 2025? Also, can you clarify what you mean by "taxable income limitation"? I thought the business income limitation was just based on the Schedule C profit. Is there another calculation I need to be aware of beyond just looking at my net business income?

Yes, exactly right on the FIFO rule! Your $570 from 2022 gets used first before any portion of the 2025 carryover can be claimed. This is why keeping detailed records by year is so important. For the taxable income limitation, there are actually TWO tests for Section 179: the business income limitation (your Schedule C net profit) AND your overall taxable income limitation. The Section 179 deduction can't exceed your taxable income for the year from all sources. So even if your business is profitable, if you have large itemized deductions, other business losses, or other factors that reduce your overall taxable income to zero or negative, you might still be limited on Section 179. Most people only think about the business income test, but the taxable income test can bite you in years where your overall tax picture is complicated. The smaller of these two limitations determines how much Section 179 you can actually claim that year.

This is such great advice about keeping all the Form 4562s! I learned this lesson the hard way too. I'm actually in my first year dealing with Section 179 carryovers and I'm already creating a dedicated Section 179 tracking system based on all the advice in this thread. One question for you - when you mention keeping a "running summary sheet," do you track this by individual asset or just total carryover amounts? I'm trying to figure out the right level of detail to maintain without making it overly complicated. I have three different pieces of equipment with Section 179 carryovers from different years, and I want to make sure I'm not over-engineering my record keeping. Also, has anyone had experience with what happens if you accidentally claim a carryover amount incorrectly? Like if you use the wrong year's carryover first instead of following FIFO order? I'm paranoid about making a mistake that could trigger problems later.