Made a (very) low budget film with a friend. How to best report the costs on taxes?

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mccannr1
mccannr1 Member Posts: 3 Newcomer

A friend of mine and I decided to make a very low budget film. I spent $5000 on it. We opened an LLC and a bank account, I gave $5k to the LLC and the money was spent out of that. They movie was finished, and made no profit (we weren't expecting to, but I just want to be clear that all $5,000 was spent and nothing was gained).

What's the best way for me to report that and maximize my personal losses on that?

I live in Michigan if that makes any difference.

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  • rachels
    rachels FreeTaxUSA Agent Posts: 51
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    Hi mccannr1,

    How did you organize your business? LLCs can be organized as sole proprietorships (only one owner), partnerships, or corporations. If you started the business with your friend and did not specifically organize it as a corporation, your business may be organized as a partnership. Please check out this helpful IRS link that explains different business structures:

    https://www.irs.gov/businesses/small-businesses-self-employed/business-structures

    If you have a partnership, you will need to file Form 1065 to report your income and related expenses to the IRS. Form 1065 is a separate business tax return, so you would file that return for the business itself. Then, in the process of filing Form 1065, you will generate Schedule K-1s for each partner. Please note that you cannot file Form 1065 using our software. FreeTaxUSA only supports the filing of individual income tax returns, not business tax returns.

    You can still file your individual income tax return (Form 1040) with us, though. When you go to file your individual income tax return to report your personal income for 2023, you will enter the information from the Schedule K-1 into your account to report your share of the partnership income. You can enter that in your FreeTaxUSA account by going to Income > Business Income > Partnership Income (Schedule K-1).

  • mccannr1
    mccannr1 Member Posts: 3 Newcomer
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    Hello. Thanks for the response. The LLC was formed as a partnership.

    So in creating a K-1 for myself, I would report the $5000 as a loss for me, and for my friend he would have a K-1 showing a $0 gain/loss? (he didn't put any money in)

    And then, essentially, that K-1 would report a negative $5000 income on my personal taxes?

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 247
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    Hi,

    Yes, you have the basics. You will still need to prepare and file the Form 1065. Then distribute the Schedule K-1, Form 1065 to the partners.

  • mccannr1
    mccannr1 Member Posts: 3 Newcomer
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    Got it. Thanks very much!