Discussion:NOL Late filed Return

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Tax Questions --> NOL Late filed Return


RLMCPA (talk|edits) said:

3 January 2006
Client is just now filing 1998-2004 Corporate Returns (1120). (And to answer your unspoken question, “yes, I did receive a big retainer to do this project.”) We expect to file by January 31, 2006.

It appears there is an NOL for 1999 and possibly for some of the other years (2000-2004). From the research I pulled, it's my undertstanding that I cannot elect to carryforward the NOL, i.e. avoid the 2 year carryback, since this election must be made by the due of the return including extensions, which for 1999 1120 would have been September 15, 2000.

My question: If I have to carryback to 1997 & 1998 (taxable income years), do I get refunds for those years? I'm afriad that the statute may have run on this, too. My only thought is that since I won't be filing 1998 & 1999 until 1/31/2006 that maybe the statute has never started at least for 1998?

Riley2 (talk|edits) said:

3 January 2006
The SOL ran out on the NOL carryback from 1999 long ago (3 years from the due date of the 1999 tax return).

RLMCPA (talk|edits) said:

4 January 2006
Riley2, do you agree that the client completely loses the NOL in this case, i.e no carryforward either? Note - there is enough income in 1997 & 1998 to completely use the 1999 NOL. Is it "deemed" to be carried back 2 years? And, if these years aren't open, it's still applied as if they were, the only difference being that the client does not benefit from the NOL carryback since the refund period has passed?

Riley2 (talk|edits) said:

4 January 2006
I agree that the NOL is lost.

Donna Foley (talk|edits) said:

15 February 2007
I have a twist on this situation. My client has late 1120's for 1999 to 2006. They have a loss for 2001. Since 1999 and 2000 have never been filed, can I use the NOL carryback on the original filing?

Kevinh5 (talk|edits) said:

15 February 2007
you have to, but you get no benefit. Also, I think in 01 it was a 3 year carryback, not 2.

Riley2 (talk|edits) said:

15 February 2007
The 2001 NOL will need to be carried back 5 years because of the 911 legislation. If after carrying back to 1996, 1997, and 1998, there is an unused NOL, this NOL can be deducted on the original 1999 return to reduce the tax to zero, but may not be used to generate a refund for 1999.

Donna Foley (talk|edits) said:

15 February 2007
Three years is ok because they had a loss for 1998. Let me get this straight. For 1999 and 2000, I don't show the carryback being used in this orginal late filing, but when I calculate the carryforward to 2002, I do it as if the carrybacks had been used. Is that correct?

Riley2 (talk|edits) said:

15 February 2007
No. Under the 2001 EGTRRA, a loss from either 2001 or 2002 must be carrried back five years unless an election out was made on a timely filed return. The remaining unused portion may be used on the original 1999 and 2000 returns, but the NOL may not be used to generate a refund.

Taxea (talk|edits) said:

15 February 2007
Riley2..I know that the IRS will "open" returns past 3 years for NOL carrybacks...are you sure they won't refund if they open the return? taxea

Donna Foley (talk|edits) said:

15 February 2007
Riley2 and Taxea

Thanks for responding so quickly

Riley2 (talk|edits) said:

16 February 2007
Taxea, the statute of limitations for a refund due to a net operating loss carryback claim is 3 years from the due date of the loss year return (including extensions). Three years from March 15, 2002 would be March 15, 2005. Therefore, they are 2 years too late to get a refund on the 2001 NOL.

Taxea (talk|edits) said:

16 February 2007
mahalo

Jerryb (talk|edits) said:

21 February 2007
Riley2, what tax regulation do you refer to with respect to your response about the remaining NOL (after reducing any taxable income in SOL years, and apparently timely-filed years) being available to reduce the tax in subsequent years? I have a client in the same situation as Donna Foley. I have been researching this for a while and this is the only place that even mentioned it. Thanks a lot for your contributions to this discussion forum.

Riley2 (talk|edits) said:

21 February 2007
I am not sure that I understand your question. An NOL is deductible under Sec. 172, but must be reduced by taxable income of the intervening years. The ordering rules say that an NOL must reduced by carrying back to the earliest year first and the NOL is reduced by the taxable income of each succeeding intervening year. Sec. 172(b). The fact that the time limit for carrying back has expired has no bearing on the requirement for this calculation. My answer would change if the taxpayer made a timely carryforward election.

Jerryb (talk|edits) said:

21 February 2007
I guess I made the situation more complicated than it was. Basically, reducing your tax liability in nonfiled, old returns based on an NOL is okay, just don't ask the IRS for any refund if you happened to pay something. This favors nonpayment of taxes by nonfilers. Obviously, NOL will have to be claimed with the original return rather than via 1040X. I am assuming F1045 should still be used to show the calculations. Thanks a lot.
  • consumer question and related answers (from 2008) have been moved to another discussion that was already in the consumer forum.

To join in on this discussion, you must first log in.
Personal tools