NOL Question - Corporation

[JohnH]

I'm considering taking on a client situation involving a "C" corp with several years of unfiled 1120 returns. Using round figures, the 2002 and prior have been filed, showing small profit amounts averaging about $1K per year, but 2003 forward have not been filed. It appears that the 2003 return has a profit of about $10K and the 2004, 2005, and 2006 returns show losses of about $5K per year.

My question is related to the penalties & interest on the 2003 return. Am I correct in telling the client that most of the $1,500 of tax on the 2003 return will be recovered via the loss carryback, but that the late filing penalty will not? Or will the loss carrybacks on the 2004 - 2006 returns also reduce the late filing penalty?

If anybody can help me think through this, I'd appreciate it.

[ChEAr$]

P& I with NOL

I'm considering taking on a client situation involving a "C" corp with several years of unfiled 1120 returns. Using round figures, the 2002 and prior have been filed, showing small profit amounts averaging about $1K per year, but 2003 forward have not been filed. It appears that the 2003 return has a profit of about $10K and the 2004, 2005, and 2006 returns show losses of about $5K per year.

My question is related to the penalties & interest on the 2003 return. Am I correct in telling the client that most of the $1,500 of tax on the 2003 return will be recovered via the loss carryback, but that the late filing penalty will not? Or will the loss carrybacks on the 2004 - 2006 returns also reduce the late filing penalty?

If anybody can help me think through this, I'd appreciate it.

The P & I will still apply on the 2003 return AS BEST I REMEMBER. However the interest might be offset by that paid when the NOL's are posted and refunds sent.

[JohnH]

Harlan: Thanks for yur thoughts. For some reason I'm having trouble thinking this one through. I finally told him we will just have to get the returns filed and see what happens, because he's going to have to get the returns filed however the P&I situation turns out.