Discussion:Apply NOL carryback to 2nd prior year 1040 with zero TI?

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Discussion Forum Index --> Advanced Tax Questions --> Apply NOL carryback to 2nd prior year 1040 with zero TI?
Discussion Forum Index --> Tax Questions --> Apply NOL carryback to 2nd prior year 1040 with zero TI?

Landertax (talk|edits) said:

22 January 2008
My client has an NOL of $140,000 for 2006. In 2004, her AGI was $46,000 and her taxable income was zero after itemized deductions.


Am I required to apply the NOL carryback to the 2004 1040 return even if it has zero taxable income after itemized deductions?


Does the IRS require me to apply some of the NOL to the AGI of $46,000 or can I just use all of it on 2005, which does have a taxable income?


I would hope that I can skip 2004 altogether, but I'm not sure of IRS regulations on this.


Thanks!!!

Kevinh5 (talk|edits) said:

22 January 2008
assuming that you are just now calculating the NOL, then YES, you must go back 2 years and see how much is used up, even though it will save her no tax that year. 
If you had done the 2006 tax return and NOL calculation in time last year, she could have carried the NOL forward.

Kevinh5 (talk|edits) said:

22 January 2008
you can access prior NOL discussions to learn why by typing in 'NOL' in the yellow box to the left, then clicking on "250 views", then choose the discussion you wish to read.

Newtaxguy (talk|edits) said:

April 3, 2008
In the case above, does the NOL that cannot reduce 2004 tax (because 2004 TI is zero) get reduced by the 2004 exemption amount before being applied to 2005? Or can full NOL from 2006 be applied to 2005?

Kevinh5 (talk|edits) said:

3 April 2008
Newtaxguy, what happens when you use the worksheet?

Newtaxguy (talk|edits) said:

April 3, 2008
Ah, therein lies the rub, Kevin.

Maybe i'm brain-dead cuz there are only 12 days left in tax season, but its not clear to me whether its appropriate to enter the exemption amounts into the worksheet if i know that the income after applying the standard deductions is below zero.

If I enter the exemption amount, the NOL carried to 2005 is reduced by the exemption amount.

If I don't enter the exemption amount, the entire NOL carried to 2004 and unused is carried to 2005.

Kevinh5 (talk|edits) said:

3 April 2008
try this worksheet

Newtaxguy (talk|edits) said:

April 3, 2008
Thanks Kevin... nice worksheet... looks like i can apply the entire carryover to 2005

Kevinh5 (talk|edits) said:

3 April 2008
see, aren't you glad that you learned something (and can bill the client too)?

Newtaxguy (talk|edits) said:

April 3, 2008
Yep.... its always better to be shown the path to the answer than to be given the answer outright.

thanks again

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