Discussion:Deadline to Waive NOL Carryback Period
From TaxAlmanac
| Revision as of 14:54, 14 May 2009 Kevinh5 (Talk | contribs) ← Previous diff |
Revision as of 15:08, 14 May 2009 LSC CPA (Talk | contribs) (ok - thanks - th) Next diff → |
||
| Line 52: | Line 52: | ||
| (on a 5 point scale, all the other attendees had given me 4s and 5s. This jerk gave me 1s and 2s because he thought the topic didn't apply to his clients. He completely missed the part of the review sheet that asked him to score the material in a separate section from the instructor - he left the material part blank, but put his remarks under the section for the instructor.)}} | (on a 5 point scale, all the other attendees had given me 4s and 5s. This jerk gave me 1s and 2s because he thought the topic didn't apply to his clients. He completely missed the part of the review sheet that asked him to score the material in a separate section from the instructor - he left the material part blank, but put his remarks under the section for the instructor.)}} | ||
| + | |||
| + | {{ForumReplyPost|UserID=LSC CPA|Date=14 May 2009|Text=ok - thanks - that is good to know - when we do the returns with NOLs we take care of the carrybacks/carryforwards at the same time, so we've never had this situation where it was done at such a late date. Appreciate all the feedback. (And funny story, too - do you ever teach in the Chicago area?)}} | ||
Revision as of 15:08, 14 May 2009
Discussion Forum Index --> Tax Questions --> Deadline to Waive NOL Carryback Period
| 27 April 2007 | |
| I know that you have to make the election to waive an NOL carryback, it says you must attach a statement with the original return filed by the due date (including extensions) for the NOL year. So what happens if the NOl is created not on an original return, but on an amended return? Here's my situation, in June of 06 the IRS came out with a Rev. Proc that allowed us to figure casualty losses from the 05 Hurricanes in a different way, it was very favorable to taxpayers. So we filed a LOT of amended 05 returns. Many had NOL's as a result. A lot of them were carried back to 2002 (3 year carryback on these) but some elected to forego the carryback and we carried it to 2006. Today I had a client come in, I made the election on her 05 amended return to forego the carryback and carried the NOL to 2006; well the IRS sent a letter saying that they could not allow it as the election had to be made by the due date of the return including extensions. Well the due date was 4/15/06; she filed the original return timely, no extension. But it just doesn't seem right, if the NOL was created on an amended return (filed 3/07), there was no way to file the election by the due date of the return.
It does say that if you didn't file the election with your timely filed return, you can file it with an amended return within 6 months of the due date of the original, including extensions. I know this is lengthy but I am really nervous on this because I think I have quite a few clients in this position, but here's one final thought, due to the Hurricanes anyone with severe Hurricane damage had an automatic extension to 10/15/06; could it be possible to file puruant to sec. 301.9100-2, (to file an amended return within six months of the due date including extensions); which would have been 4/15/07? Or does the fact that she actually filed on time ruin that chance? I would really appreciate some thoughts on this. | |
| 27 April 2007 | |
| I believe that the Service issued a Rev. Proc. on this topic. My interpretation of the revenue procedure is that the deadline for affected taxpayers for waiving the carryback period under Sec. 172(b)(3) and Reg. 301.9100-2 is extended to six months after the October 15, 2006 due date. See Rev. Proc. 2005-27, Sec. 6, Item 29.
There is nothing in the law that requires the 172(b)(3) election to be filed on an original return. See Reg § 301.9100-12T(d). Thus, if your client filed an amended return, which contained the election, by 4/17/07, the waiver should be effective. | |
Www.cpa1.biz (talk|edits) said: | 27 April 2007 |
| Hang ourselves!!! | |
| 11 May 2009 | |
| We have a similar situation - but taxpayer was not affected by Hurricane Katrina. A prior accountant completed taxpayer's 2004 taxpayer and did not include at-risk computations that would have allowed our client to take a large loss from his S-corp. The client had contributed sufficient funds as a loan to the corp, but the accountant didn't take that into account. He then amended the return in October 2008 and elected to waive the carryback period, and then amended the 2005 return, taking into account the carryforward. IRS now says that no NOL from 2004 can be carried forward without first carrying it back. I saw reference to a rule that states that you have 6 months after original return to waive the carryback, but what about in a circumstance such as this, when a return was amended a few years later due to a mistake? Must carry back first? Just picked up this client and want to make sure we understand this correctly. | |
| 12 May 2009 | |
| You are out of luck. Net operating losses are oftentimes discovered years after the loss is sustained, but there is no provision in the law for an extension of time for this election. | |
| 12 May 2009 | |
| That's what I was afraid of. So now it's too late to take advantage of the NOL because the years that would be affected with the 2-year carryback are too far gone to be able to get a refund. I suppose there's no exception to that rule either. | |
| 12 May 2009 | |
| the prior accountant might ought to have left well enough alone. At least with the suspended losses he could take them eventually. Now they are gone forever.
can anyone say E & O? | |
| 12 May 2009 | |
| BUT: was perhaps the amending of 2004 already beyond the statute of limitations???? Maybe it didn't 'take'? | |
| 12 May 2009 | |
| No, the 2004 amended was filed right before the SOL expired. So at least he got the refund for the year the NOL was created. They're saying that the 2005 amended for the NOL carryforward isn't correct because the NOL can't be carried forward until it was carried back first. Once I carry it all back, to 2002 and 2003, there won't be anything left to take in 2005. And, he won't get the refunds he would have otherwise received for those years because the SOL has expired for 2002 and 2003. | |
| 12 May 2009 | |
| Correct: the statute for 2002 and 2003 expired when the statute for the NOL year (2004) expired. | |
| 14 May 2009 | |
| Are you saying that the SOL for 2002 and 2003 would have been extended due to the NOL from 2004, to the SOL for amending the 2004 return, which would have been 10/15/08? So, instead of the2002 and 2003 amended return SOL expiring 10/15/06 and 10/15/07 (both returns were extended), respectively, they would have both expired 10/15/08? Just want to make I am understanding you correctly. Thanks. | |
| 14 May 2009 | |
| yes, that is a basic NOL taxation rule
and makes a good EA SEE exam multiple choice question | |
| 14 May 2009 | |
| thus the prior accountant shouldn't have been handling the NOL because he didn't know what he was doing and botched it up big time | |
| 14 May 2009 | |
| (actually, the statute is not really extended for those prior years, it is just that the NOL is available to carry back as long as the statute for the NOL year is open) | |
| 14 May 2009 | |
| thus upon examination, absent fraud or an understatement of at least 25% of income, the only thing the IRS could question with respect to 2002 and 2003 would have been the 2004 NOL. | |
| 14 May 2009 | |
| I tell this story often because it still mystifies me how someone could be so ignorant.
I laughed when I read that idiot's review: his mind was made up before he even came to the seminar (which had advertised the topics to be covered, so I am at a loss why he even came or what he expected to get out of it) that he didn't want to learn anything. He sat with his arms folded reading the newspaper the entire time. I am SURE that in 20 years MANY of his clients have had NOLs and 1031s, but this idiot was too stupid to recognize them. (on a 5 point scale, all the other attendees had given me 4s and 5s. This jerk gave me 1s and 2s because he thought the topic didn't apply to his clients. He completely missed the part of the review sheet that asked him to score the material in a separate section from the instructor - he left the material part blank, but put his remarks under the section for the instructor.) | |
| 14 May 2009 | |
| ok - thanks - that is good to know - when we do the returns with NOLs we take care of the carrybacks/carryforwards at the same time, so we've never had this situation where it was done at such a late date. Appreciate all the feedback. (And funny story, too - do you ever teach in the Chicago area?) | |
