2004 Nol

[Gary]

A client dropped off a packet which included his 2004 return and a letter from the IRS because he has not filed his 2005 return (nor 2006 and 2007). The 2004 return had a large NOL (about $60000) and a capital loss carryover of more the one million.

His 2005 income was about $16000 on a 1099-misc, and the IRS letter calculated his tax, SS, and a quite large penalty and interest. It gave him the option of paying or filing his return, which i assume is why he came to me (I have not yet spoken to him).

My question is, "Is there a time limit for carrying his NOL forward to 2005?" Would he have had to do this on a timely-filed return and since he didn't, lose the NOL, or can we still file the return with the NOL carry-forward? I assume that we can never get rid of the penalty or interest.

Any help would be appreciated.

Gary

[geekgirldany]

Was there a statement filed with the 2004 return to waive the carryback period? If not then you will have to go back two years then forward 20 years. (Double check the NOL rules for tax year 2004). If there was any refund for 2002 and 2003 returns because of the NOL carryback then they have been lost but it will help him on the carryforward years. You would have to get the 2005 return in by April 15, 2009 since that is when the expiration would be on that year for refunds. 3 years after the due date.

I did one of these about three years ago. Alot of work. Get a retainer.

[erchess]

Another Point

If you get the bottom line on the 2005 return to zero or a refund there won't be any penalties or interest at all and if you merely reduce the original amount owed you will reduce the penalty and interest.

[S T]

2004 Nol

2004 NOL would have to be carried back 2 years before the NOL year and then forward unless a timely election was made on the 2004 tax year See Pub 536 2004 http://www.irs.gov/pub/irs-prior/p536--2004.pdf page 3. Also note, I don't believe you can use form 1045 for carryback, must be an amended return. See column 2, page 7 for instructions and time limits on Form 1045 and Form 1040X. I believe you have lost the NOL carryback from 2004, form 1040X appears to be due by 4/15/08 or 10/15/08 including extensions.


Sandy

[geekgirldany]

Yeah looks like he has lost the claim to refund:

"Form 1040X. If you do not file Form 1045, you can file Form 1040X to get a refund of tax because of an NOL carryback. File Form 1040X within 3 years after the due date, including extensions, for filing the return for the NOL year. For example, if you are a calendar year taxpayer and filed your 2004 return by the April 15, 2005, due date, you must file a claim for refund of 2002 tax because of an NOL carryback from 2004 by April 15, 2008."

What I am thinking is that he lost the claim to refund but can still amend the 02 and 03 returns to do the carryback/carryforward process.