Partnership LLC losses for 3 years - Do I have to claim the loss on my personal tax return?

Thanks for the info! I'm in a similar situation. If the IRS does determine it's a hobby, what happens then? Do we have to go back and amend previous returns? And is there any specific documentation I should be keeping to prove it's a legitimate business beyond just receipts?

If the IRS determines your activity is a hobby, you'd generally have to amend returns for open tax years (usually the last three years). The main consequence is that hobby expenses are only deductible as itemized deductions subject to 2% of AGI limit, and only up to the amount of hobby income - meaning you can't use hobby losses to offset other income. For documentation, keep more than just receipts. Maintain a separate business bank account, create business plans showing profit intent, document time spent, keep records of marketing efforts, and show how you're adapting strategies to improve profitability. Also consider consulting with a tax professional to review your specific situation.

How exactly does it work? Do you have to upload sensitive documents or tax returns? I'm always hesitant about putting financial info online.

Sounds interesting but I've been using my accountant for years and he seems to know his stuff. Does this thing actually tell you anything that a decent accountant wouldn't already know?

You don't have to upload your actual tax returns - you can just input the specific information you need guidance on, like business structure, years of losses, and what documentation you have. It maintains confidentiality while giving you personalized advice. It's different from an accountant because it can instantly reference thousands of tax regulations and real case outcomes to show you what the IRS is specifically looking for in your situation. Many accountants give general advice, but this tool shows you exactly what documentation has worked in cases similar to yours, including specific IRS memos that most accountants don't have time to research.

How does this actually work? I thought the IRS phone lines were just perpetually busy. Does Claimyr somehow cut the line or something?

Yeah right. There's no way this actually works. I've been trying to get through to the IRS for months about my business losses. I don't believe any service can magically get you through when millions of people are calling.

It doesn't cut the line - it uses technology to continuously dial and navigate the IRS phone system for you. When it finally gets through, it calls you and connects you directly with the IRS agent. It's basically doing the waiting for you instead of you having to sit on hold for hours. The reason it works is because their system can make multiple attempts simultaneously and navigate the complicated IRS phone tree perfectly each time. When I used it, I just went about my day and then got a call when they had an agent on the line. It was honestly a huge relief after wasting so many hours trying myself.

What are those 9 factors exactly? My husband and I have a small custom furniture business that's been losing money for 2 years now and I'm worried about next year.

The nine factors are: 1) Whether you carry on the activity in a businesslike manner (separate accounts, good records), 2) Your expertise or that of your advisors, 3) Time and effort you put into the activity, 4) Expectation that assets used will appreciate in value, 5) Your success in similar activities, 6) Your history of income or losses, 7) Amount of occasional profits earned, 8) Your financial status (other income sources), and 9) Elements of personal pleasure or recreation. Remember that you don't need to meet all nine factors - the IRS looks at the overall picture. For your furniture business, document your efforts to market, improve efficiency, reduce costs, etc. Even showing that you're adjusting your business model to address losses demonstrates business intent rather than hobby pursuit.

I've had good experience with H&R Block's premium online version for our small partnership. It walks you through the K-1 entries pretty clearly and has specific guidance for situations with multiple years of losses. Not saying it's perfect but worked better than TurboTax for me.

Thanks for the recommendation! I'll give H&R Block a try this year. TurboTax kept giving me warnings about the hobby loss rule but didn't really explain what documentation I should be keeping or how to demonstrate business intent. Hoping for a clearer experience.

This is really helpful, thank you! I'm new to this community but dealing with a similar situation with my online retail business. Quick question - you mentioned the nine factors under Section 183. Is there a specific timeframe where the IRS typically looks at these factors? Like, do they evaluate each year individually or look at the overall pattern across multiple years? I'm in year 2 of losses and want to make sure I'm documenting everything correctly from the start.