LLC loss

[Unregistered]

Taxpayer is a member of an LLC. LLC K-1 shows net earnings from self -employment of $-33000. If TP puts the loss from self-employment on the return she is not eligible for additional child tax credit and recieves refund of about $1000. If TP shows no loss from self-employment than she qualifies for additional child tax credit and recieves refund of $2800. Can the TP fail to count the self-employment loss against her other source W2 income so as to have positive earned income and thus qualify for the additional child tax credit? Wouldn't this be the same as operating a sole proprietership and omitting some expenses so that you show a profit instead of a loss? Will the IRS match up the K-1 showing the loss and the 1040 showing no loss and ask questions?

Thanks in advance!

[Bees Knees]

If audited, the IRS would take away the credit due to the K-1 loss. With IRS K-1 matching, I would not try to ignor the K-1.

If the situation was reversed where the K-1 loss would increase her refund, I'm sure she would want you to report the K-1 loss.

[Unregistered]

K-1 loss

but if she had no basis for this loss she would have to "ignore" it. I guess i don't understand why she is required to take the loss if it does not provide her with any benefit.

we are still showing the $50,000+ in GP for the year, along with W2 income from other sources, but the taxpayer just has alot of itemized deductions, so she ends up with no taxable income.

My point would be that if she did not have basis to deduct this loss she couldn't, so why would the IRS require her to take the loss when it is not needed to reduce income?

[Unregistered]

maybe I'm not being clear enough

K-1 shows the following

Ordinary Loss - ($87,701)
Guaranteed Payments - $52,079
Net Self-Employment Earnings - ($35,622)

Outside basis is $88,851

If she takes the entrie loss of $87,701 her basis at the end of the year her new basis on Jan. 1 would only be $1150. Without the K-1 after itemized deductions and personal exemptions she has taxable income of $11,849. Why can't she take $11,849 of the loss, zero out her taxable income, qualify for additional child tax credit and preserve the rest of her loss and basis for a year in which the LLC shows a profit?

Am I correct in stating that if she did as I am advising she would have net self-employment earnings of $0?

I hope this more clearly shows the details of the situation.

Thanks!

[Bees Knees]

Using the loss as an NOL carryback or carryforward will give her a far greater tax benefit than any child tax credit.