Understanding Tax At-Risk Rules: A Guide for Filing Taxes on TaxAct

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Discussion Overview

This thread centers around participants' experiences and questions regarding how to answer tax-related questions on TaxAct, particularly concerning the "at risk" rules for investments in their business. Participants share their uncertainties and seek clarification on how to categorize expenses and investments when filing taxes.

Discussion Character

  • Exploratory
  • Opinion-based
  • Anecdotal

Main Points Raised

  • One participant expresses confusion about how to indicate whether all or some of their investment is at risk due to a net loss in their business.
  • Another participant shares their understanding that investments are considered at risk if they were purchased with personal funds.
  • One participant, identifying as a consultant, mentions that their director advised choosing "Not Applicable" for the investment risk question.
  • Several participants state that all investments are at risk, citing the potential loss of business as a reason.
  • One participant notes that a CPA provided guidance on the tax question during a tax class, reinforcing the idea that all investments are at risk.
  • Another participant discusses their experience categorizing expenses in TaxAct, detailing specific categories they used for various business-related purchases.
  • One participant inquires about writing off utilities for a home office, sharing their perspective on not claiming a home office deduction.

Areas of Agreement / Disagreement

Views differ on how to categorize investments as at risk, with some participants advocating for "At Risk" while others mention "Not Applicable" based on personal advice. There is no clear consensus on the best approach to answering the tax question.

Contextual Notes

Participants share personal experiences and advice received from directors and CPAs, reflecting a range of interpretations regarding tax filing practices specific to their business as Pampered Chef consultants.

Who May Find This Useful

Consultants seeking insights on tax filing practices and how to categorize their business expenses may find the shared experiences and discussions relevant.

S
supergirljennie
Messages
588
I'm filing my own taxes on TaxAct, but I have no idea how to answer this question:

Since there is a net loss for this business, indicate if all the investment is at risk or if some investment is not at risk.

All investment is at risk
Some investment is not at risk
Not Applicable

Anybody know how to answer this? Help would be appreciated!
 
Bumping up
supergirljennie said:
I'm filing my own taxes on TaxAct, but I have no idea how to answer this question:

Since there is a net loss for this business, indicate if all the investment is at risk or if some investment is not at risk.

All investment is at risk
Some investment is not at risk
Not Applicable

Anybody know how to answer this? Help would be appreciated!
Click to expand...
EEW I saw that too and was also Stuck.
 
  • Thread starter
  • #3
I'm reading some more, and it says investments are at risk if you invested cash in them...

Which I did, right? I purchased them with my own money...

Someone who knows better will explain it to me, right?! :(
 
  • Thread starter
  • #4
If anyone else wanted to know, my director told me to choose N/A. Hope that helps someone!
 
You need to choose AT RISK. Because all of your investment is at risk of being lost if your business does not make it.
 
  • Thread starter
  • #6
fruit76loop said:
You need to choose AT RISK. Because all of your investment is at risk of being lost if your business does not make it.
Click to expand...

Did a CPA tell you this? I'm not trying to sound rude, so forgive me if I do.

My director said it's because if we lose our businesses, you still have your products. Is that incorrect?
 
Yes a CPA told me this. Actually it was Kathy Yellets', Senior Director, husband who did a tax phone class. And that was one of the first items he told us.
 
  • Thread starter
  • #8
fruit76loop said:
Yes a CPA told me this. Actually it was Kathy Yellets', Senior Director, husband who did a tax phone class. And that was one of the first items he told us.
Click to expand...

Thanks so much then, for the information. I'll pass it on to my director so we can share with her downline! :)
 
supergirljennie said:
I'm filing my own taxes on TaxAct, but I have no idea how to answer this question:
QUOTE]

I am using Taxact too. Where do you put your expenses in? Did you put products you had bought in a separate place are all together? I cannot decide where to put what.
Click to expand...
 
  • Thread starter
  • #10
jrstephens said:
supergirljennie said:
I'm filing my own taxes on TaxAct, but I have no idea how to answer this question:
QUOTE]

I am using Taxact too. Where do you put your expenses in? Did you put products you had bought in a separate place are all together? I cannot decide where to put what.
Click to expand...

The expense catagories they have are (that I used):

Advertising (This is where I put purchases from VIP and my website, but also ads in papers, things like that)

Under office expense, sub catagory Supplies (Where I put my filing cabinet, paper, pens, lap boards, my flash drive, etc as well as my supply orders)

Under insurance, sub catagory Insurance (other than health) (this is where I put our demo insurance)

Then there are write in spots for Other Expenses

The catagories I used are:
Consultant Gifts
Food purchases (for shows and practice)
Products (including my kit, enhancement purchases, samples)
Postage

That's what I have done! I hope that helps!
Click to expand...
 
Thanks Jennie it helps a lot!!! I have got to get to adding my expenses up b/c right now I am OWING money and my husband is not going to be please. BUT I have not entered my expenses yet.

Do you write off part of your utilities for a home office?
 
supergirljennie said:
jrstephens said:
The expense catagories they have are (that I used):

Advertising (This is where I put purchases from VIP and my website, but also ads in papers, things like that)

Under office expense, sub catagory Supplies (Where I put my filing cabinet, paper, pens, lap boards, my flash drive, etc as well as my supply orders)

Under insurance, sub catagory Insurance (other than health) (this is where I put our demo insurance)

Then there are write in spots for Other Expenses

The catagories I used are:
Consultant Gifts
Food purchases (for shows and practice)
Products (including my kit, enhancement purchases, samples)
Postage

That's what I have done! I hope that helps!
Click to expand...

What are you including in your consultant gifts? I just ask because the first year I had my CPA do the taxes she suggested I do things differently. Tax law on gifts is very strict about it being limited to $25 per person per year. so, if you have a repeat host and she had a $1000 show so you gave her a large round stone...you can only write off $25 of that. Then if she hosts again that same year, you can't write off any gifts you give her. But if you catagorize it as incentives, then they are unlimited. The difference between incentives and gifts is easily determined...Did you offer something to make more of your business? Then it is an incentive. I have very few gifts in my expenses. I have a team members flowers for her new baby, my cluster Christmas gifts and my director's Christmas gift. Thats it for gifts for me!
Click to expand...
 
Do you write off part of your utilities for a home office?[/QUOTE]


I dont say that I have a home office because I dont use my office just for PC I talked to someone who does taxes and she said that if I got audited I would hae to remoe everything out of my office that was not PC related
 

Frequently Asked Questions

What are Tax At-Risk Rules?

Tax At-Risk Rules are regulations that limit the amount of losses a taxpayer can deduct from their taxable income based on the amount they have at risk in an investment. This means that if you invest in a business or property, you can only deduct losses up to the amount you have personally invested or are at risk of losing.

How do Tax At-Risk Rules affect my tax return?

These rules can affect your tax return by limiting the losses you can claim. If your losses exceed your at-risk amount, you cannot deduct the excess losses in the current tax year. Instead, you may carry them forward to future years when you have sufficient at-risk amounts to claim those losses.

Who is subject to Tax At-Risk Rules?

Tax At-Risk Rules apply to individuals and entities that invest in businesses, partnerships, or certain types of property. This includes sole proprietors, partners in partnerships, and shareholders in S corporations who have invested capital or have a stake in the business.

How do I calculate my at-risk amount?

Your at-risk amount generally includes the money you have invested in the business, plus any loans you have personally guaranteed. You should subtract any amounts that you have withdrawn from the business or any non-recourse loans, which do not count as at-risk amounts.

Can I use TaxAct to help with Tax At-Risk calculations?

Yes, TaxAct provides tools and resources to help you calculate your at-risk amounts and determine how they affect your tax deductions. The software guides you through the process of entering your investment details and calculating your allowable losses based on the Tax At-Risk Rules.

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