How to Write off a Business Loss
Even with the best business practices, a loss can sometimes occur. Losses, however, can be written off on your business taxes if you have receipts and other financial papers demonstrating the loss. Business losses and some approved operational expenses and deductions will decrease or eliminate any sales taxes the business would have had to pay to the Internal Revenue Service.
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Instructions
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Determine which IRS form is appropriate for your business. If your business is a partnership or joint venture, you will need IRS Form 1065. However, if your business is a sole proprietorship, you will need an IRS Form 1040 and Schedule C. Both the IRS Form 1065 and IRS Form 1040 with Schedule C allow you to report loss statements for the business to the Internal Revenue Service. Corporations and large business are generally ineligible, and losses are typically limited to $30,000.
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Obtain a copy of an IRS Form 1065 or IRS Form 1040 and Schedule C. Forms and directions can be downloaded from the official IRS website (see Resources). Alternatively, call the IRS at 800-829-1040 to request that a form be sent to you.
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Complete the IRS 1040 Form, if applicable. Provide personal identification information such as your name, address and social security number in section one, all earned income and profits in section two and any payments are taxes made in section three. Entering your business losses on line 12 in section four, then sigh and date at the bottom.
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Fill out Schedule C, if applicable. In the first section, calculate gross income and profits. In the second section, detail your business losses and deductions. Most business expenses, such as rent for retail space, are eligible deductions. With these figures, complete the third section to determine your total profits and losses. Based on this figure you will be able to determine what taxes you owe, if any.
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Fill out IRS Form 1065, if applicable. In section one, provide your employer identification number plus your personal identification information such as your name and home address. Also list other partnership or business information in section one. In section two, list all owners of the business, and what percent of the own, on lines L through M. All 100 percent should be accounted for. In section three, list the total dollar amounts for all partners then sign and date at the bottom.
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Attach the completed Schedule C or IRS 1065 Form to the back of your IRS Form 1040, whichever is applicable, and submit it to the IRS.
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