NOL Carryforward

[cattivo]

Hi,

My business had a NOL last year, which I elected to waive carryback.

I want to carryforward the loss this year, the spot to put the NOL carryforward (I'm told through taxact software) is in the "other income line 21" which is outside of the schedule C. Therefore my business shows a profit this year, and I have to pay self-employment tax on that (again according to the software).

Is this accurate? That I have to pay $2000 in self-employement tax, even though my AGI is negative $32K? My schedule c business income this year was 16k.

I'd like to know if that is how it works, or it's just a software glitch.

Thanks so much!

[Pacun]

What kind of business do you have?

[Lion EA]

Did you ask your software company?

[BulldogTom]

What is generating the negative AGI this year if your business made a profit?

[jainen]

>>the spot to put the NOL carryforward (I'm told through software) is in the "other income line 21" which is outside of the schedule C.<<

That's the same thing IRS says! According to Pub 536, "If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the Other income line of Form 1040." As you observe, that is outside Schedule C so SE tax is simply not affected at all by an NOL carryover. It is even clearer for a carryback year where tax has already been calculated. "While it is necessary to refigure your income tax, alternative minimum tax, and credits, do not refigure your self-employment tax."

[rfassett]

That is exactly the way it works. And I was led to believe at one point that the inequity was more a function of SSA's inability or undesire to do adjustments for "out of current year's" issues. Anyway, self employment tax is not a bad thing. It builds up your credits for disability benefits (which anyone of us could need at any given time if life serves up some lemonade) and credits for future retirement benefits (future viability of the system not withstanding).

[cattivo]

thanks for the help - though not thrilled with the answer, I appreciate it.