Discussion Archives:Did not do proper Carryback Waiver in 2008; have NOL to Waiver in 2009

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Discussion Forum Index --> Advanced Tax Questions --> Did not do proper Carryback Waiver in 2008; have NOL to Waiver in 2009


Discussion Forum Index --> Tax Questions --> Did not do proper Carryback Waiver in 2008; have NOL to Waiver in 2009

OCNumberz (talk|edits) said:

8 October 2010
I didn’t use the Yellow Search Box that Kevinh5 seems to insist on (…g) but I did find this link right at the top when I Googled my NOL request:

Discussion:NOL claim on 2009 1040

I read thru and confirmed that my Drake software was doing the correct thing with a 2008 NOL on a 2009 return:

Per Kevin: “um, you don't use the 1045 for 2009 if you are carrying a 2008 NOL to 2009, you just use line 21 of the 1040 (software may have specific input spot it wants you to use, but it flows to line 21)”

Line 21 seemed like an odd place to me since the taxpayer had an additional loss for 2009 and didn’t ‘need’ the 2008 loss, but I guess the 1040 is really a catch-all for all other forms, and is probably the best way for the IRS to keep tabs on it. After doing some investigating on the IRS site, I ran across this info:

If you filed your return timely but did not file the statement with it, you must file the statement with an amended return for the NOL year within 6 months of the due date of your original return (excluding extensions). Enter "Filed pursuant to section 301.9100-2" at the top of the statement.

Because the tax software had 2 ways to produce the 1045PG2 (Sch A), I unknowingly used the one that did NOT lead me to a box to check off that I wanted to “elect under Section 172(b)(3) to relinquish the entire carryback period for any 2008 NOL.” I read that you can correct this error within six months of the due date for the return, and without her having done an extension, it would have been 4/15/09…long before I got her tax materials.

I believe from what I’ve read that I will again do this election for her 2009 NOL. But, how can the 2008 election that was not done in a timely fashion be corrected now? She’s in her 20’s, and I don’t think she had any income or did any returns prior to 2008.

Any suggestions before next week’s filing deadline?

Kevinh5 (talk|edits) said:

8 October 2010
If I understand the problem correctly (big assumption, I know)

you don't have to worry about carrying back if there is nothing to carry back to.

OCNumberz (talk|edits) said:

8 October 2010
Good, Kevin, I can worry about other things!  ; )

I'll do the waiver for 2009 and forget about 2008.

Not sure if you're familiar with this, but Drake Support says that the 1045 does not efile with the return...it must be mailed. This makes sense for the 1045 Sch B part, Application for Tentative Refund, but not for the Sch A part, which is just a reconciliation of the NOL to the 1040 Line 41. So, I don't know if I need to mail this 1045 Sch A separately, and if I do, whether the entire return needs to be included.

Any experience with this requirement? Thank you!

Kevinh5 (talk|edits) said:

8 October 2010
you should follow the instructions in the IRS pub 536 about what to attach. In your case, since it will all carry over to 2010, you attach nothing extra. Keep the 2009 1045 Sch A to support your entry on the 2010 line 21.

OCNumberz (talk|edits) said:

8 October 2010
I was just reading Pub 536 last night when Mr. Sandman got the best of me...didn't get that far. I'll go back and look...THANKS!! I'm guessing it gets mailed when you actually want your refund, but I might be wrong. Logic used to work better for me before tax work.  ; )

Cotopop (talk|edits) said:

9 October 2010
Another good source for understanding what to attach,if anything is the 2009 Instructions for 1045.

If I understand it correctly your client didn't have income or file tax returns in 2006 and 2007 so the 2008 NOL can now move forward to 2010. I also use Drake software and it's a bit tricky so be sure the NOL is moving forward .You should have a worksheet produced by the program that shows all carried forward information (capital loss carryforward,NOL etc ) I recommend you review it before you finalize the 2009 return.

OCNumberz (talk|edits) said:

9 October 2010
Cotopop Tom...believe it or not, I started there! But, until I did some other reading (including Tax Almanac) and talked to Drake Support, it didn't make a whole lot of sense. The instructions for Form 1045 note the 'Purpose of Form' right on page 1:


Carryback an NOL

Carryback and unused general business credit

Carryback net Section 1256 contracts loss

Claim on overpayment under § 1341(b)(1)


None of these apply to this taxpayer, and I think this is what Part B of the Form 1045 is used for. Drake produces Part A (reconciliation to 1040 Line 41), and it seems to me that this is all that is needed here. Drake also produces and efiles the ELECTION form stating very clearly that she'll want to carryforward her loss.

The instructions also make very clear (Page 2) that the 1045 is NOT to be included in the same envelope with the income tax return. For this taxpayer, had I done 1045 Sch B, I would have included these items:


1040

Sch C (only the business involved in the loss)

2009 Extension of Time to File


Kevin, I have a comment on searching.... I would have searched this on the word mail, but it would have taken attach to find it!  ; )


Thanks to you both for your help!! I now have a good overview on NOL's and the difference in purpose of Sch A and Sch B. I'm happy to be on the 'simple' end of this one!  : )

Cotopop (talk|edits) said:

9 October 2010
OC NUMBERZ... You might consider looking at the Workpapers developed from Drake and make sure that the following 2 worksheets exist and properly show the carryover to 2010:

A worksheet called "Carryover Worksheet,List of items that will carryover to the 2010 tax return". You should have a single entry under net operating loss that reflects the combined NOL for 2008 and 2009.

A worksheet called "Net operating Loss carryover/Carryback worksheet" that should have entries for 2008 and 2009.

OCNumberz (talk|edits) said:

11 October 2010
Cotopop Tom, I looked at the worksheets right away to understand their purpose. They seemed OK to me at a glance, although they supposedly DO NOT get efiled with the return. For this return, I get:


WK_NOLCO Worksheet for COL Carryover form 2009 to 2010

WK_NOL Net Operating Loss Carryover / Carryback Worksheet


The second worksheet looks correct, showing both correct totals for 2008 and 2009 in the Remaining Carryover column.

But, the first worksheet seems to do an odd computation that I can't understand. It takes the 2008 loss shown on the 1040 Line 21 for 2009, does some computations and ends up with what is to appear on the equivalent 1040 Line 21 for 2010. Instead of it being the TOTAL of 2008 and 2009, it is 2008 only. That makes no sense to me. The computation is comprised of these numbers:


Line 2: 2009 loss increased by the Standard Deduction and by the Personal Exemption

Line 8: Subtracts the Standard Deduction

Line 9: Computes Modified Taxable Income, but requires a ZERO if this number is less than zero, and it was.

Line 10: So, the NOL CARRYOVER TO 2010 ends up being the 2008 amount plus ZERO (rather than the 2009 amount) and DOE NOT match what the Net Operating Loss Carryover / Carryback Worksheet says.


This does not make any sense to me, although the 1040, which is the part the IRS will see, looks fine.

OCNumberz (talk|edits) said:

11 October 2010
Oops, it would help if I would read the ENTIRE heading for the worksheet. No wonder only 2008 was shown as being carried forward, not 2009... The form is titled:


Worksheet for NOL Carryover from 2009 to 2010

(For an NOL Year Before 2009)

(Keep for your records)


So, I think I'm OK. Thanks Kevin and Tom for your help!  : )


OCNumberz (talk|edits) said:

12 October 2010
This is a similar situation to the one in Discussion:Amend a 1040 for an NOL election....the taxpayer filed no 2008 return and no extension and came to me recently to do both 2008 and 2009. She's young, and 2008 is her first return. It is too late to do the carryback waiver for the 6-month from return due date (10/15/09) deadline. She again has an NOL for 2009 and the election to waive the carryback will be filed in a timely manner.


What is likely to happen with the 2008 loss since there is nothing to carry to back to? Will it be lost, or is the procedure to carryback first and then carryforward with the 2009 loss?

Nightsnorkeler (talk|edits) said:

12 October 2010
2008 gets carried back; since there is nothing to carry it back to it would carry forward to the 2009 return. Calculate the proper 2008 NOL unused in 2009 to carry forward to 2010 and the 2009 NOL carry forward to 2010 and go from there next year.

OCNumberz (talk|edits) said:

12 October 2010
Thanks, Nightsnorkeler...I think I'm good!  : ) I just didn't want her to lose it.

Dongola (talk|edits) said:

21 October 2010
New client filed a timely 2008 return with a NOL.

The question now is whether or not I can amend the 2006 1040 to claim a refund using the 2008 NOL 2-year carryback. Is my window to claim the refund for 2006 closed based on the statute of limitations?

Thanks.

Kevinh5 (talk|edits) said:

21 October 2010
what is the appropriate statute date, Dongola, the NOL year or the carryback year? (Hint: the answer is in the IRS pub or you can search via the yellow box and actually read some of the discussions. Either way you are bound to learn something.)

DaveFogel (talk|edits) said:

21 October 2010
Another hint: Sec. 6511(d)(2)(A).

Dongola (talk|edits) said:

16 November 2010
I appreciate the posts Kevnh5 and DaveFogel.
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