NOL statement

[Questionguy101]

This year, my tax program requires an explanation statement for NOL carryover from last year. Without that, it refuses to efile the tax return. Is this a new requirement?

So, what are we supposed to put in the statement? Can it be a simple statement like "taxpayer has a NOL carryover from year 2010 and the amount is entered on line 21"? Or do we have to give a detailed explanation of how the NOL came from?

[S T]

Not knowing which software you use - Cant' comment

I would think you can make a simple Comment with some relevant figures from the prior year and address what the Software "audit trail" is asking.

I often make efile notes to go with the electronic filing.

Sandy

[DMICPA]

Statement on NOL

Most likely any comment would pass the e-file test. Just putting there is an NOL carryforward from 2010 to 2011 would work.

Bob

[Gretel]

Interesting. I thought this statement is a requirement, I have done it since over 10 years. If several years involved I will break down by years.

[DMICPA]

Nol

If you have a NOL, it is a good ieda to attach a detailed schedule. Don't forget the state NOL if any, can be a different amount so detailed records are important.

Also, make sure the software carries forward the correct Federal and State amounts each year. a glitch in one year will mess up all other years.

If you switch tax packages, it is really important to make sure all loss and other carryover figures do make their way into the new program.

I found that even more important is to keep the returns for all years in which an NOL is generated.

A client got an IRS audit and the return was carrying forward an NOL from 15 years prior. The agent wanted to see the return from 15 years ago. If we could not provide the return, the entire loss was disallowed. We came out OK on this but it could have been a mess.

[RitaB]

Is it just me?

Do you hate NOL's or what?

Also, do you ever want to be a smart alek and say, "Take a look at line 21" for the "Explanation"?

I always attach worksheets, too. Once a hundred years ago, I got challenged on how I figured the tax on somebody's huge disability settlement that covered three or fours years. I sent them the SS worksheets and wanted to say, "See, you should not be telling us not to send the worksheets."