How to Write Off a Business Loss for the IRS

by Mar Vin ; Updated July 27, 2017

Items you will need

  • Schedule C tax form
  • 1040 tax form
  • Tax guide for small business
  • Tax form 1065 (if needed)

Any business investment that shows a loss financially can be written off during tax time. You must have proper documents and receipts to prove that you lost money in order to decrease or eliminate the amount of tax you owe the IRS. Certain business expenses such as rent, mortgage payments, insurance, automobile and travel expenses, depreciation of goods, and others are allowed to be used to reduce your tax burden.

Step 1

Determine if your business investments require that you fill out a Schedule C or Form 1065 with your 1040 form. Profit or loss statements for sole proprietorships will need a Schedule C form and businesses that involve partnerships or joint ventures will require a Form 1065.

Step 2

Acquire the necessary tax forms for your business as well as instructions on how to complete them. You may get the forms from post offices, public libraries and professional tax serivces. They are also available from the IRS via snail mail, and electronically via the Internet. Remember that each form is specific to the tax year that your business loss happened.

Step 3

Fill out your business tax forms. If you're using the Schedule C, you will need to complete your full name, social security number, legal business name, type of business, and the address. The first part of the form will require the total gross income your business earned for the year. The second part will list all of your business expenses. The last section is where the calculation of your total profit or loss for the year will be listed.

If you must use Form 1065, you will need to list all entities that own shares in the partnership, as well as the percentages each one owns. Record your employer identification number, name, address, and other partnership information in Part 1. In Part II, L through M, list owners and their percentages of partnership to total 100%. On Part III list dollar amounts for all partners involved.

Step 4

Complete the 1040 form. Enter your business losses on line 12.

Step 5

Attach your Schedule C form (or 1065 if used for joint business accounts) to the back of your 1040 form and submit them to the IRS.

About the Author

Mar Vin has been a freelance writer for over two and half years. Her work can be found on many websites such as hardwarestore.com, leisurepro.com, mhrusa.com, and more. She has a Bachelor of Science degree in nutritional sciences and dietetics from the University of Nebraska.

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