Business Losses

[TJL 89]

Hi, All!

 

Prepping for my i864 and wanted to know:

 

How are business losses handled?

 

Hypothetical:

 

If total wages from regular employment were around $44k, but business losses of $25k were claimed, will they consider the $44k as the income and NOT deduct the business loss, or will they deduct the business loss when calculating the income?

 

Thanks, all!

[VNN 147]

I say they will consider business loss. The reason: Profit or Loss From Business (Schedule C) is part of your Individual Income Tax Return  Form 1040. When you submit I-864, you are required to use 3  most recent x total income (1040) or adjusted gross income (1040EZ). I do not think they need to examine your tax form too much but just read line  for Total Income/AGI.

[pushbrk 12,898]

6 hours ago, RTLE said:

I say they will consider business loss. The reason: Profit or Loss From Business (Schedule C) is part of your Individual Income Tax Return  Form 1040. When you submit I-864, you are required to use 3  most recent x total income (1040) or adjusted gross income (1040EZ). I do not think they need to examine your tax form too much but just read line  for Total Income/AGI.

That is correct for entering the information about the past, which is about tax returns.  However, an employee does not qualify based on tax returns alone, but on documented ( pay stub) current income.

 

They are going to consider the totality of circumstance.  If the loss was isolated to one year, and the other years and current income look, good then probably OK.

 

Confusion about tax returns vs current income is very common.  Don't fall into that trap.

[TJL 89]

On 4/3/2019 at 2:33 AM, pushbrk said:

That is correct for entering the information about the past, which is about tax returns.  However, an employee does not qualify based on tax returns alone, but on documented ( pay stub) current income.

 

They are going to consider the totality of circumstance.  If the loss was isolated to one year, and the other years and current income look, good then probably OK.

 

Confusion about tax returns vs current income is very common.  Don't fall into that trap.

Awesome.  Thank you.

 

So if, in addition to transcripts, I provide current proof of income via paystubs, bank deposits, and merchant account incoming client payments, I should be good-to-go, yes?

 

I truly appreciate your insight.

[pushbrk 12,898]

1 minute ago, ThomasLyon said:

Awesome.  Thank you.

 

So if, in addition to transcripts, I provide current proof of income via paystubs, bank deposits, and merchant account incoming client payments, I should be good-to-go, yes?

 

I truly appreciate your insight.

NO!.  Merchant account incoming client payments are business revenue, not income.  Are you an employee, self employed or both?  If both, sure send the pay stub from employment but your current income is going to be considered as the amount on the total income line of your 2018 tax return.

 

Interpret "literally" not "conveniently".

[TJL 89]

Just now, pushbrk said:

NO!.  Merchant account incoming client payments are business revenue, not income.  Are you an employee, self employed or both?  If both, sure send the pay stub from employment but your current income is going to be considered as the amount on the total income line of your 2018 tax return.

 

Interpret "literally" not "conveniently".

So I work a full-time job (with a W-2,) but also own and operate an LLC, single member, with elected pass thru taxation. 

 

So the business revenue flows through to my Schedule C and will show both income and expenses, per that schedule.

 

As you indicated above, 

Quote

an employee does not qualify based on tax returns alone, but on documented ( pay stub) current income.

If I am both an employee and a single member LLC owner, does that change the CO's viewpoint?  My paystubs from my regular job more than qualify.

 

My 2018 transcript meets the guideline for my situation... but just barely.  My paystub income more than meets the guideline.

 

My prior years transcripts do not meet the guideline. (Business deductions, etc.) 

 

What would you recommend in my situation to be properly prepared?

[pushbrk 12,898]

57 minutes ago, TJL said:

So I work a full-time job (with a W-2,) but also own and operate an LLC, single member, with elected pass thru taxation. 

 

So the business revenue flows through to my Schedule C and will show both income and expenses, per that schedule.

 

As you indicated above, 

If I am both an employee and a single member LLC owner, does that change the CO's viewpoint?  My paystubs from my regular job more than qualify.

 

My 2018 transcript meets the guideline for my situation... but just barely.  My paystub income more than meets the guideline.

 

My prior years transcripts do not meet the guideline. (Business deductions, etc.) 

 

What would you recommend in my situation to be properly prepared?

If you had asked BEFORE you filed your 2018 income tax, my answer would have been to make sure to show more total income.  The CO is going to consider the totality of circumstances, which I am NOT seeing.  For example if your Schedule C business is more a tax haven than a real source of income, it will be obvious. On the other hand, if you have constant business losses that are significant, they'll consider you a higher risk for your spouse becoming a public charge.  It's all a judgement call.

 

I think you would be "correct" to state your current income as your annualized pay from your job, and document it with a pay stub but know they are still going to consider everything.  If you can add and document some liquid assets, that will help.

 

Self employment is a two-edged sword.  Yours appears to lower your tax burden but it does so by using a paper loss that reduces your paper income.

[TJL 89]

5 minutes ago, pushbrk said:

If you had asked BEFORE you filed your 2018 income tax, my answer would have been to make sure to show more total income.  The CO is going to consider the totality of circumstances, which I am NOT seeing.  For example if your Schedule C business is more a tax haven than a real source of income, it will be obvious. On the other hand, if you have constant business losses that are significant, they'll consider you a higher risk for your spouse becoming a public charge.  It's all a judgement call.

 

I think you would be "correct" to state your current income as your annualized pay from your job, and document it with a pay stub but know they are still going to consider everything.  If you can add and document some liquid assets, that will help.

 

Self employment is a two-edged sword.  Yours appears to lower your tax burden but it does so by using a paper loss that reduces your paper income.

Yes, yes, and yes.  I think you truly understand the dilemma.

 

For what it's worth, I have filed an amendment to my 2018 and 2017 1040s to correct the errors, however, from what I understand, amended 1040s do not show on the IRS return transcripts, only the actual initial return data.  (See screenshot from IRS transcript website.)

 

Nevertheless, I appreciate your insight and I'll be sure to be as prepared as possible, for virtually any line of inquiry that may come up.  (I'll be present at the Interview.)  

 

Thanks again!

[pushbrk 12,898]

4 minutes ago, TJL said:

Yes, yes, and yes.  I think you truly understand the dilemma.

 

For what it's worth, I have filed an amendment to my 2018 and 2017 1040s to correct the errors, however, from what I understand, amended 1040s do not show on the IRS return transcripts, only the actual initial return data.  (See screenshot from IRS transcript website.)

 

Nevertheless, I appreciate your insight and I'll be sure to be as prepared as possible, for virtually any line of inquiry that may come up.  (I'll be present at the Interview.)  

 

Thanks again!

Just an aside for those who insist on telling every member here, they can do it themselves.  If you were being well advised by a professional from the start, they would have suggested you show a good income on your 2018 tax return or even the 2017 if it had not yet been filed when you filed the petition (hired the pro).  After doing so and obtaining the transcript, amending returns to "remember" forgotten deductions would remove the extra tax burden while the transcript still shows the original income figures.  

The anonymous quote in my signature tends to illustrate this concept.  

[TJL 89]

Just now, pushbrk said:

Just an aside for those who insist on telling every member here, they can do it themselves.  If you were being well advised by a professional from the start, they would have suggested you show a good income on your 2018 tax return or even the 2017 if it had not yet been filed when you filed the petition (hired the pro).  After doing so and obtaining the transcript, amending returns to "remember" forgotten deductions would remove the extra tax burden while the transcript still shows the original income figures.  

The anonymous quote in my signature tends to illustrate this concept.  

100% agreed.