Discussion:NOL Carryforward
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Discussion Forum Index --> Advanced Tax Questions --> NOL Carryforward
Discussion Forum Index --> Tax Questions --> NOL Carryforward
| 22 October 2008 | |
| I am preparing 04 - 07 1040's for a client with schedule C. He has a NOL in 05 and 06. I understand the time is past to elect to forego the carryback for both of those NOL's (172(b)(3)). The 05 NOL will then need to be carried back to 03 where it can be used but where no refund can be generated (so I am not planning on amending the 03). The 06 NOL will need to be carried back to 04, where it cannot be fully used, then to 05, where it cannot be fully used, then to 07 where it can be fully used. I assume I can put it on the original returns seeing as they have not yet been filed.
Please let me know if my thinking is correct on this. THANKS!! | |
| 22 October 2008 | |
| because it is too late to elect forward for 05 and 06, Taxea. | |
| 22 October 2008 | |
| Cporter, you still need to compute how much NOL is used by 03 even if it doesn't generate a refund.
There was a year in there somewhere when NOLs were carried back more than 2 years. Better check. | |
| 22 October 2008 | |
| The whole 05 NOL would be used by 2003. Do I actually need to prepare a 1040X for 2003 to should how much NOL is used by 2003 even though it won't generate any refund? THANKS! | |
| 22 October 2008 | |
| OK, I get it now.
You're right, I would just do the 06 NOL to 04, explaining to client that it wouldn't pay to have you re-work 03. | |
| 22 October 2008 | |
| Cporter1 -
I think you attach to your 1040X the NOL calculations on Form 1045 Schedules A and B. Form 1045 Schedule A shows the IRS the calculation of the original amount of the NOL, and Schedule B shows the "intervening year" calculations. You're not actually filing the Form 1045, you're just filling out the Form 1045 worksheets as attachments to the Form 1040X. Check out the instructions for Form 1040X. | |
| 22 October 2008 | |
| he's not doing a 1040X, he is just now filing 2003, 2004, 2005, 2006 original 1040s. | |
| 22 October 2008 | |
| Why not file for the refund from the NOL carryback to 2003? The SOL for NOL carryback claims is based on the year of the NOL, not the year of the carryback, which in your case is 2005, not 2003. | |
| 22 October 2008 | |
| I was assuming that personal exemptions and deductions were so high that no tax was paid, but you are correct, Taxtamer, maybe my assumption was incorrect. | |
| 22 October 2008 | |
| I wonder how that will work? - We know that penalties and interest on original returns don't change when we carry back an NOL, which puts the taxpayer in a worse position than if the NOL was taken on the return as originally filed. So, I wonder if we can defeat this problem by simply including the NOL carryback as a deduction on the earlier return as we are filing it now? | |
| 23 October 2008 | |
| I agree with smokeytax in that it would seem to be better to put the NOL on the original returns as we are filing them now. I assume this is OK. I don't see anything that would disallow this. Anyone disagree?
You are right, Taxtamer, maybe I should carryback the NOL to 03. I'll have to run the numbers but I think refund would be worth my fee. The second part of my question was that if the 06 NOL is carried back to 04, then 05 and is STILL not used, I can still carry it forward to 07, correct? | |
| 23 October 2008 | |
| I believe that refund claims attributable to NOL carrybacks must be submitted on a separate return. Remember that penalty and interest calculations are made without regard to carrybacks. | |
| 23 October 2008 | |
| Yes, Cporter1, any of the '06 NOL not used up in the carryback to '04 & '05 will be a carryforward to '07. | |
