2012 return shows an NOL carryforward (from 2011) on Line 21 of $-30000. It also had a loss on Line 17 (from 1120S) of -$8000. Since there was already negative gross income without consideration of the NOL, I am assuming all of the NOL C/F of $-30K can be carried over to 2013. Should I also be computing additional NOL to be added to the -$30K carryforward due to the business loss on Line 17? That was the last year of the business, it was closed out. There are substantial wages on 2013, so we can use all of it this year. The prior year's tax preparer did not attach any worksheets.
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Was there any income on Page 1 other than the 8000 scorp loss and the line 21 NOL c/f? -
Yes, there were wages of $4,476 and interest of $40 on the 2012 return. Plus a capital loss of -$3,000. Actual loss on Line 17 was -8,858. Total AGI before the -30,221 C/F was -7,342. I think I have to refigure the carryover (disregarding the capital loss). When I do this in the 2012 return (I input the return in my software to calculate since the prior preparer's worksheets were not included) it does a calculation and nets a carryover of -26,963 to 2013. He took a standard deduction, so there was no adjustment of itemized deductions to factor in.
I remember way in the back of my mind sometime in the course of a class on NOL's, that it was mentioned one should itemize even if it is less than the standard deduction in these cases. However, I did it both ways this year, and it didn't make any difference. I could have dis-remembered, since I didn't know anything about NOLs at the time. I am not so sure I know a lot about them now, but I am re-educating myself.Comment
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Burke, that is not what I come up with. I calculate that the NOL from 2012 is 4382. You get your nonbusiness deductions to the extent of your nonbusiness income. So that wipes out the 40 in interest.
That leaves the wages of 4476 and the scorp loss of 8858. Net those, the NOL is 4382.
None of the 30000 c/f from prior years was used in 2012.
That gives you a 34476 c/f to 2013.Comment
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You are correct in that none of the C/F loss was used in 2012. That's why I thought it would all C/F to 2013, plus whatever NOL resulted in 2012. (I did not take any adjustment of the $40 interest into consideration, however, and it appears neither did the software.) My first post said NOL c/f was $30K as I was rounding off. Actual NOL c/f is -30,122. So if last year's NOL was -4382, and the unused c/f was -30,122, the c/f should be -34,504? I will have to revisit the 2012 worksheet to see how it came up with the other amount. It's important, since we will use it all this year and he will still have positive AGI.Comment
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Yes, I come up with a c/f to 2013 of 34,504. Good that your client can use it all up in 2013, out of a loss situation and into income!Comment
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Thank you Maribeth. I was hoping you would jump in on this. I went back and reviewed my calculation worksheets, and it came out right on the money. I had transposed one of the figures. In fact, once you understand it, it was amazingly simple. I tried reading the NOL pub. and got an extreme headache -- never did get through it.Comment
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I had a very good instructor who showed us how to make the process simple.
1. Look at Page 1. Identify the business incomes/losses. Add those up. That is the potential NOL.
2. Look at Page 1. Identify the nonbusiness income/losses. Add those up. If they are less than the standard deduction/itemized deductions, then your NOL is as in #1.
3. If the nonbusiness income/losses are more than the standard deduction/itemized deductions, then the amount in #1 is reduced by that excess.
Of course there are the exceptions and the items that mess things up. But the above is a real good start to the NOL question.
Glad I could help.Comment
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Also be sure you keep record of the loss for each year and the amount used each subsequent year. You use up the oldest loss first. Include a breakdown of calculation statement on the return. i.e.
TY 2010 NOL LOSS 100000.
TY 2010 NOL LOSS USED IN TY 2011 (50000)
BALANCE OF TY 2010 NOL LOSS CARRIED TO TY 2012 50000.
TY 2012 NOL LOSS 35000.
TY 2010 NOL LOSS USED IN 2012 (30000)
TY 2012 NOL LOSS USED IN 2012 (0.00)
BALANCE OF TY 2010 NOL LOSS CARRIED OVER TO 2013 20000.
BALANCE OF TY 2012 NOL LOSS CARRIED OVER TO 2013 35000.
TOTAL NOL LOSS CARRIED OVER TO 2013 55000.
I do this every year until the losses are used up. The statement links to 1040 Ln 21Believe nothing you have not personally researched and verified.Comment
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