My client has a partnership which is a loss. On his federal, he does not have any tax liability with no balance due or refund. Does this taxpayer have to file a federal tax return?
If I'm understanding the chain of events correctly, you have already filed Form 1065 on behalf of this client, and you are now working on his filing requirement for his individual Form 1040, at which point we are reporting the items of loss that have flowed to him from the partnership on his Schedule K-1.
You indicate that he may not have a 1040 filing requirement, but this is based on the fact that he does not have a tax liability. I assume you mean that total tax on Line 24 of Form 1040 is zero. Regardless, even if the client's 2025 tax is zero, in future years he may hope to offset that year's tax liability with prior year losses. Net Operating Losses reported for tax year 2025, can be carried forward indefinitely. In order to claim the current year losses as an offset to future tax liabilities, you must file Form 172 in the year the business losses are incurred as an attachment to the federal 1040.
Otherwise, all the benefits of incurring business losses are, basically, forfeited. In other words, yes, you should file a federal tax return for this individual.
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