How to handle QBI Loss Carry Forward rules for closed business?

The QBI loss carryforward is actually mandatory under the tax code. According to IRC Section 199A, a QBI loss must be carried forward and used to reduce QBI in the next tax year. It's not optional, even if the business that generated the loss no longer exists. Think of it this way - the QBI calculation looks at your qualified business income across ALL qualified trades or businesses. So even though the financial consulting business closed, the tax code sees it as part of your father's overall qualified business activities. For your father's situation, the $21,500 QBI loss from the financial consulting business must be carried forward and will offset any positive QBI from the rental business in 2023. The IRS views this as a way to accurately reflect the true economic outcome of your father's business activities over time.

Just wanted to share my experience with QBI issues. I was struggling with similar questions last year and discovered https://taxr.ai which completely saved me. I uploaded my Schedule C and some other documents, and they helped me figure out exactly how to handle my QBI carryforward situation. The tool explained step by step how the QBI calculation works across multiple businesses and showed me how to properly document it. It even identified that my tax software was calculating my QBI incorrectly! I was about to leave about $3,800 on the table before I caught it.

I want to follow up about my experience with taxr.ai after trying it. I'm honestly surprised at how helpful it was with my QBI situation. I had multiple businesses with some losses and some gains, and it clearly showed how the losses needed to be carried forward and applied. The document analysis was impressive - it pulled all the relevant numbers from my prior year returns and explained exactly how the QBI loss carryforward would affect this year's return. The guidance was clear and referenced the specific IRS rules that applied to my situation. What I really appreciated was the clear explanation of how QBI losses work when a business closes - something my expensive CPA couldn't even properly explain to me. Saved me both money and a huge headache!

If you're still struggling with getting a definitive answer about your QBI situation, I had a similar issue and ended up calling the IRS directly. After being on hold forever, I finally connected with someone who gave me conflicting information from what my tax software was showing. I was getting so frustrated until I found https://claimyr.com which got me connected to an actual IRS agent in less than an hour instead of waiting on hold all day. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that QBI losses MUST be carried forward even from closed businesses, and they walked me through exactly how to document it on my return. Apparently this is something that confuses even some tax pros.

I'm back to eat my words about Claimyr. I tried it yesterday out of desperation, and I actually got through to the IRS in about 45 minutes. The agent was incredibly helpful and confirmed everything about the QBI loss carryforward being mandatory. She explained that under Section 199A, there's no provision allowing taxpayers to opt out of the carryforward, even for closed businesses. The agent walked me through exactly how to report it on my father's return and confirmed that the remaining loss from the financial business will continue to offset future QBI until it's used up completely. Honestly shocked at how efficiently this worked. I'd been trying to get a straight answer on this QBI issue for weeks!

I experienced something similar with my small business that closed in 2021. The QBI rules can be really frustrating when you're dealing with a shutdown. One thing to consider - even though your dad closed the financial consulting business, did he receive any 1099s in 2023 for work completed in 2022? Sometimes there's trailing income that could offset some of that carryforward. Also, is there any chance the rental activities could be aggregated as a single business with proper election? That might help optimize how the losses are applied.

Has anyone dealt with the state tax implications of QBI loss carryforwards? My state doesn't conform to the federal QBI deduction and I'm getting conflicting advice on how to handle the loss carryforward on my state return.

I went through a very similar situation when my mom had to close her accounting practice due to health issues. The mandatory QBI loss carryforward felt really unfair at the time, especially since we knew she'd never have enough business income to use it all up. One thing that helped us was keeping detailed records of exactly how the loss was being applied each year. We created a simple spreadsheet tracking the original loss amount, how much was used each tax year, and the remaining carryforward balance. This made it much easier when preparing returns and helped us optimize other tax planning decisions. Also, don't overlook that if your father ever does any consulting work in the future - even small projects - that income could help absorb some of the carryforward. Sometimes retirees end up doing occasional work that qualifies as business income. The IRS agent I spoke with mentioned that even minimal business activity can help utilize these losses over time. I'm sorry to hear about your father's diagnosis. These tax complications are the last thing families need to deal with during difficult times.

I'm dealing with a similar QBI loss carryforward situation with my LLC that I had to wind down last year due to market conditions. Based on my research and conversations with my tax preparer, the mandatory nature of QBI loss carryforward can feel really harsh when a business closes permanently. One thing that might help your planning - if your father's rental properties ever generate enough net income, you could consider whether any property management activities might qualify for additional QBI treatment. The "active management" aspect you mentioned could be significant depending on the scope of his involvement. Also, while the $21,500 loss carryforward from the consulting business seems daunting, remember that QBI losses offset QBI income dollar-for-dollar before the 20% deduction calculation. So even modest rental profits over several years can gradually absorb that balance. Have you considered consulting with a CPA who specializes in Section 199A? Given your father's health situation and the complexity here, it might be worth the investment to ensure you're not missing any planning opportunities or making any reporting errors that could trigger issues down the road.

I'm sorry to hear about your father's Alzheimer's diagnosis - that must be incredibly difficult for your family to navigate on top of these complex tax issues. From what I understand about QBI rules, the loss carryforward is indeed mandatory under Section 199A. Even though it seems counterintuitive that the IRS would "force" you to take a deduction, the way I think about it is that the QBI calculation looks at your overall qualified business activities across time. The carryforward mechanism ensures that temporary losses in one year don't permanently eliminate the tax benefit - they just get applied when you have offsetting income. For your father's situation, that $21,500 from the consulting business will continue to carry forward and offset any positive QBI from the rental properties (or any other qualified business income he might have in future years). While it's frustrating that he may never fully utilize the entire carryforward given the circumstances, at least the rental income will gradually chip away at it. One suggestion: given the complexity here and your father's health situation, you might want to document everything clearly for future tax preparers. Keep records of the original loss amounts, how much gets applied each year, and the remaining carryforward balance. This will be invaluable as you manage his taxes going forward. Wishing your family all the best during this challenging time.

I'm so sorry to hear about your father's Alzheimer's diagnosis - dealing with complex tax issues during such a difficult time must be incredibly overwhelming for your family. You've received some excellent advice here about the mandatory nature of QBI loss carryforwards. I wanted to add one practical consideration that might help with your planning: since your father was actively managing the rental properties, make sure you're maximizing the QBI benefit from that activity. The rental real estate business can sometimes qualify for the full 20% QBI deduction if it meets the "active participation" requirements under the safe harbor rules. Given that your father was handling tenant screening, maintenance coordination, and rent collection, you might want to verify that you're claiming the maximum QBI treatment for the rental activity. This could help absorb more of that $21,500 carryforward from the consulting business. Also, as others have mentioned, keep detailed records of the carryforward amounts and how they're applied each year. This will be especially important if you need to transition tax preparation responsibilities as your father's condition progresses. The tax code can feel particularly unfair when life circumstances change unexpectedly, but at least you now have a clear understanding of how the carryforward will work going forward. Wishing your family strength during this challenging time.

I'm really sorry to hear about your father's Alzheimer's diagnosis - that adds such a difficult layer to an already complex tax situation. From my experience dealing with QBI issues, the carryforward is indeed mandatory under Section 199A. What helped me understand it better is thinking of QBI as looking at all your qualified business activities as one big picture over time, rather than year by year. The $21,500 loss from the closed consulting business will keep carrying forward until it's absorbed by future QBI income, even if that takes many years. One thing that might help is setting up a simple tracking system now - I keep a spreadsheet with the original loss amounts, what gets used each year, and the remaining balance. This has been invaluable for tax preparation and planning. Also, since your father was actively managing the rental properties, make sure you're getting the maximum QBI treatment for that activity. The hands-on management you described might qualify for additional QBI benefits under the rental real estate safe harbor rules, which could help absorb more of that carryforward. The tax rules can feel particularly harsh when life circumstances change, but at least now you have clarity on how this will work going forward. Wishing your family strength during this challenging time.

I'm really sorry to hear about your father's diagnosis - dealing with complex tax issues during such a challenging time must be incredibly difficult for your family. Based on the responses here, it's clear that QBI loss carryforward is mandatory under Section 199A, even for closed businesses. While this feels harsh in your situation, I wanted to share a perspective that might help with long-term planning. Since you mentioned your father actively managed the rental properties (tenant screening, maintenance, rent collection), you should definitely explore whether this qualifies for the rental real estate safe harbor under the QBI rules. If you can meet the 250+ hour requirement and other criteria, the rental income might receive more favorable QBI treatment, which could help absorb that $21,500 carryforward more efficiently. Also consider: even though the consulting business is closed, if your father ever does any occasional work in the future - even small projects or brief consulting - that income could help utilize the carryforward. Sometimes retirees find opportunities for limited work that qualifies as business income. The tracking spreadsheet idea mentioned by others is excellent. Document the original loss amounts, annual usage, and remaining balance. This will be invaluable as his condition progresses and you potentially work with different tax preparers. While it's frustrating that the full carryforward may never be used, at least you now understand how it works and can plan accordingly. Wishing your family strength during this difficult time.

I'm sorry to hear about your father's Alzheimer's diagnosis - this must be such a difficult situation for your family to navigate on top of dealing with complex tax rules. Based on everything I've read here, it's clear that QBI loss carryforward is indeed mandatory under Section 199A, even when a business has permanently closed. While this feels unfair in situations like yours, the tax code treats all qualified business activities as part of one overall calculation over time. One thing I'd suggest exploring is whether you might be able to elect to aggregate your father's rental activity with the closed consulting business for QBI purposes. If they can be properly aggregated as a single trade or business, it might provide more flexibility in how the losses are applied and could potentially optimize the overall QBI treatment. Also, given that your father was actively managing the rental properties, make sure you're claiming the maximum QBI benefit available for that activity. The level of involvement you described - handling tenant screening, maintenance coordination, and rent collection - sounds like it could qualify for favorable treatment under the rental real estate safe harbor rules. The documentation suggestions others have made are excellent. Keep detailed records of the carryforward balance and how it's applied each year. This will be crucial as you manage his taxes going forward, especially if his condition progresses and you need to work with different tax professionals. While that $21,500 carryforward may feel overwhelming, remember that it will offset rental QBI dollar-for-dollar, so even modest rental profits will gradually reduce the balance over time.