NOL from Amended tax return not processed yet - filing 2014

[Judy rocks]

I have a client who I filed a 2010 1040X with an NOL that we chose to carryforward.
We have a letter that the Amended tax return has been received and is processing.
The amended tax return was already looked at by Audit and they chose not to contest it.
I'm assuming we won't get word by October 15th.
My question is how do I file his 2014 form 1040.
With the NOL?

[TaxGuyBill]

Can you clarify?

What do you mean you filed a 2010 1040 that you choose to carry forward? Was it carry-forwarded from 2009? Did you just recently amend the 2010?

If the NOL was created in 2010 and you recently amended it, you are not allowed to waive the carryback. It would be carried back to 2008, but 2010 is past the statue of limitations for refund and the NOL would be lost (unless it created a NOL for 2008 and 2009, then it would be carried to 2011). It doesn't matter if an auditor caught it or not.

[Judy rocks]

2010 NOL waived carryback on NOL

It was an amended tax return for 2010 that had a large NOL Carryforward.
I am not looking for any refunds.
I'm looking to know if I can use the NOL in 2014 when the Amended 2010 tax return isn't final.
It has been sent in.
I saw that I could waive the carryback for a 2010 NOL.

Can you clarify?

What do you mean you filed a 2010 1040 that you choose to carry forward? Was it carry-forwarded from 2009? Did you just recently amend the 2010?

If the NOL was created in 2010 and you recently amended it, you are not allowed to waive the carryback. It would be carried back to 2008, but 2010 is past the statue of limitations for refund and the NOL would be lost (unless it created a NOL for 2008 and 2009, then it would be carried to 2011). It doesn't matter if an auditor caught it or not.

[WhiteOleander]

I think you would have to amend 2011, 2012, 2013 first to get the proper carry forward to 2014. You can't just pick up a number from 2010 and put it on 2014.

[Judy rocks]

1040X required?

the client had: a loss in 2011, taxable income of 1,398 in 2012, taxable income of 5,092 in 2013.
I can file 1040X's for 2011-2013 years but is it required?
Can I just calculate what the reduction in the NOL would have been for those years and apply it to 2014.
Total refund for the NOL's applied to 2011-2013 won't offset the cost of preparation.

I think you would have to amend 2011, 2012, 2013 first to get the proper carry forward to 2014. You can't just pick up a number from 2010 and put it on 2014.

[Golden Rocket]

Possible 1045 treatment

I think Miss Oleander is correct. Her mathematics are correct as the loss must be systematically and stepwise reduced for each of the years.

In lieu of amended returns, I wonder if a submission on a 1045 would suffice. Does anyone know?

[WhiteOleander]

Shortcuts do not usually work. You will have to do the amended returns and figure the NOL carry forward for each year to the next year. The IRS will want to see proof of the correct the carry forward. Just submitting a worksheet that shows the c/f will not please them.

[Judy rocks]

you are right

It looks like a form 1045 will work.
I agree the NOL must be stepwise reduced for the other 3 years.
But I cannot submit the 1045 now because the Amended tax return hasn't finished processing.
There will be plenty of NOL left after the 2011-2013 form 1045.
Thanks for pointing out that I would have to do the stepwise reduction

But back to my original question.
My clients tax return is due October 15th.
The Amended 2010 tax return is not final.
How do I file 2014?
Maybe I should pay the tax and then file the 1045 after October 15th and include the 2014 results?

I think Miss Oleander is correct. Her mathematics are correct as the loss must be systematically and stepwise reduced for each of the years.

In lieu of amended returns, I wonder if a submission on a 1045 would suffice. Does anyone know?

[TaxGuyBill]

Let's back up again.


Was the NOL created in 2010, or was it carried forward (or back) from another year?

Did you waive the carryback on the ORIGINAL and "timely filed" 2010 return, or did you add it to the amended return? You can NOT waive the carryback for 2010 if you just added the carryback to the amended return. In order to waive the carryback, it MUST be on an original, timely filed return. If you just added to the amended return, it is not a valid election. (Unless told otherwise, I'm still going to give links to IRS.gov and the Cornell site with the law code):

http://www.irs.gov/publications/p536/ar02.html#en_US_2014_publink1000177379

No, you can't use Form 1045. That must have been filed by December 31st, 2011 (assuming the NOL was created in 2010). You only use 1045 as a worksheet to figure out what the proper carry forward would be.

http://www.irs.gov/publications/p536/ar02.html#en_US_2014_publink1000177379

For your direct question, if the 2010 return has a VALID and timely filed election to waive the carryback, file the 2014 return with the proper NOL carry forward (computed and reduced for the intervening years). Just because the 2010 amended return has not been processed yet, does not mean you can't use the NOL carryforward. It's possible the processing of the 2014 return would be delayed, but I suspect it would not.

[WhiteOleander]

I do not think the 1045 will work. But, I have not done many. I think that form is for a NOL created in the current year and the t/p wants to carryback. But, you are not carrying back. You are going forward.

As for the original question, I would file the 2014 with the NOL figured using the 2010 amended numbers. Just be sure to figure the intervening years to get the proper carry over.

[Judy rocks]

No loss to carryforward on originally filed tax return

The NOL was created in 2010.
The taxpayer filed an original 2010 tax return with estimates.
We filed an amended tax return that contained business losses on Schedule C and large business Casualty Losses.
On the amended tax return we elected to carryforward the NOL.
The Schedule C business and the business Casualty loss were not included on the originally filed tax return.
There was no loss to carryforward on the originally filed tax return.

Let's back up again.


Was the NOL created in 2010, or was it carried forward (or back) from another year?

Did you waive the carryback on the ORIGINAL and "timely filed" 2010 return, or did you add it to the amended return? You can NOT waive the carryback for 2010 if you just added the carryback to the amended return. In order to waive the carryback, it MUST be on an original, timely filed return. If you just added to the amended return, it is not a valid election. (Unless told otherwise, I'm still going to give links to IRS.gov and the Cornell site with the law code):

http://www.irs.gov/publications/p536/ar02.html#en_US_2014_publink1000177379

No, you can't use Form 1045. That must have been filed by December 31st, 2011 (assuming the NOL was created in 2010). You only use 1045 as a worksheet to figure out what the proper carry forward would be.

http://www.irs.gov/publications/p536/ar02.html#en_US_2014_publink1000177379

For your direct question, if the 2010 return has a VALID and timely filed election to waive the carryback, file the 2014 return with the proper NOL carry forward (computed and reduced for the intervening years). Just because the 2010 amended return has not been processed yet, does not mean you can't use the NOL carryforward. It's possible the processing of the 2014 return would be delayed, but I suspect it would not.

[TaxGuyBill]

The NOL was created in 2010.
The taxpayer filed an original 2010 tax return with estimates.
There was no loss to carryforward on the originally filed tax return.

Then it's not a valid election to waive the carryback.

The NOL must be carried back to 2008. You can't get a refund for those early years, but if 2008 becomes an NOL due to the 2010 carryback, it can be carried to 2009, then 2011, then 2012, then 2013, then 2014. If 2008 and/or 2009 absorbs the 2010 NOL, the NOL (and any refund) is now lost.

[taxea]

I think Miss Oleander is correct. Her mathematics are correct as the loss must be systematically and stepwise reduced for each of the years.

In lieu of amended returns, I wonder if a submission on a 1045 would suffice. Does anyone know?

Both should be done and yes a 1045 will get the refund/s issued faster.

[Judy rocks]

Suprised

I agree!
You are right a 1045 will not work on a 2010 Amended tax return's NOL.
I will have to submit 1040X's.

I'm surprised that you are advising to use the NOL with the 2014 tax return even though the amended 2010 tax return isn't final.
What is your reasoning?
Will there be a matching issue?

I do not think the 1045 will work. But, I have not done many. I think that form is for a NOL created in the current year and the t/p wants to carryback. But, you are not carrying back. You are going forward.

As for the original question, I would file the 2014 with the NOL figured using the 2010 amended numbers. Just be sure to figure the intervening years to get the proper carry over.

[WhiteOleander]

Well, if you think the 2010 1040X is correct, go with the numbers. If it turns out wrong, you will have to amend the 2014. But, if you file the 2014 w/o the 2010numbers, you will definitely have to amend once the 2010 numbers are accepted. So, with one scenario, you might have to amend. With the other, you will absolutely need an amended return. That's just my reasoning. I would present both sides to the client and let them decide.