NOL Carry Forward

[LawrenceGR]

I have a client that has $6872 Loss carry forward from 2005. His income for this year is only about $4000. I only want to use enough loss to offset this year's income, I am having trouble getting my software( Proseries) to understand that. Does anyone have any insight?I think there is probably a switch somewhere I am missing. Thanks in advance.

[Bees Knees]

You can't choose how much loss you want to use this year. The NOL rules require you to use it all, and then any excess, under the NOL carryover rules, gets carried over to 2007.

ProSeries makes this calculation automatically for you.

[LawrenceGR]

Thanks

I thought that I was missing something, because the program was using it all and carrying more to 2006 carryover. I have a knack for making things harder than they really are. I would assume then that the statement would read something as simply as " NOL carryover from 2005" .

[Jesse]

I have a NOL for 2006 that I want to elect to carry forward and I have a couple questions for 2007 planning.

The NOL that will be applied to 2007 will reduce income, however it will not reduce the amount subject to 2007's SE tax correct?

Do I only need to attach the election in the year of the carryforward?

I created a "dummy" 2006 file to estimate what the picture for 2007 might look like w/ the carryforward and the software prompts for an "explanation" - what will I need to explain?

[Maribeth]

The NOL that you carryforward to 2007 will not reduce any SE income, only regular income.

You make the election to carryforward in the year that the NOL is incurred, on a timely filed return.

Your software should probably bring forward an NOL carryforward schedule that will serve as an explanation. If not, something as simple as: NOL incurred 2006 & elected to carryforward of $$$$. If not all used up in 2007, then you'll keep a carryforward schedule showing the amount originally incurred and then the amounts used in each succeeding year.

HTH,

Maribeth

[LawrenceGR]

Election to Forego Carryback

You make that election with a IRC Sec 172(b) (3) which is irrevocable, so once you make it that's it. This does allow the carry forward.

[Gretel]

You can't choose how much loss you want to use this year. The NOL rules require you to use it all, and then any excess, under the NOL carryover rules, gets carried over to 2007.

ProSeries makes this calculation automatically for you.

Bees, if I follow the instructions on how much NOL is used up in a carry-forward year, I find that ProSeries is not making these calculation correctly. Is this your experience too? Or am I doing something wrong?

[cpadan]

Regardless of what software you are using, my advice is to do the calculation yourself and then make sure the program does it right.
Dan

[Bees Knees]

Bees, if I follow the instructions on how much NOL is used up in a carry-forward year, I find that ProSeries is not making these calculation correctly. Is this your experience too? Or am I doing something wrong?

It has calculated it correctly for me in the past. I guess I should check to see if this year's program is still doing it correctly.

[LawrenceGR]

Checked the calculation

I have checked the calculation with the worksheet and Proseries is indeed doing it right. After having done this "The Old Fashion way" I sure am gald we have tools like computers and software.

[Gretel]

Thanks for this post. I use ProSeries too, and then obviously I am not understanding something following the instructions. I don't have many NOL's so I always start from scratch.
Would you be willing to look at something for me after tax season?

[LawrenceGR]

I'd be glad to

This is the first NOL I have ever had, I had to read through the instructions quite a few times but it did work out right. You can send me a private mailing through this board and from there we can make arrangements.