NOL They Don't Need to Use / Line 21 Anyway?

[RitaB]

Client has a NOL this year, also losses carried forward from 2011 and 2012. Program enters the sum of the carryovers from 2011 and 2012 on line 21. Is that correct? I don't understand why it should be entered at all. OTOH, my motto at times is "overkill is underrated".

So, I'm checking with you sages.

I did a brief search, but you know what happens with three letters. Lots of red and yelling.

Oh, and the "Line 6, CB or CO Avail (NOL Worksheet) Nonbusiness Deduction" added both their standard deduction and itemized amount to get the nonbusiness deduction. Took me a while to catch it. Just FYI.

[jklcpa]

An NOL carryforward is reported on line 21, and it will make line 21 negative if it is the only item on that line, or if it exceeds the other income on that line. Make sure that you don't need to carry back first, or that the NOL coming forward is that which is remaining after the carryback, or that the client elected to only carry forward.

I don't understand why you are saying that the program is adding the NOLs from 2011 and 2012 together. Was the 2011 NOL shown on the 2012 return on line 21, and then that is part of what is creating the NOL for 2012?

[RitaB]

2013 Farm Loss 8,000, interest income 200

Unused NOL carried forward from 2012 5,000

Unused NOL carried forward from 2011 4,000

I have -9,000 on line 21. And -16,800 on line 22.

They don't need to carryback. Yes, I made up the numbers. I just started thinking isn't it unnecessary to enter the -9,000 on line 21?

[David1980]

Say the 2013 return had income instead of losses. The NOL offsets the income by using a negative on line 21. In that situation it would be necessary to have the -9,000 on line 21. I would imagine the reason the IRS has you enter it on line 21 regardless is to simplify things. Why have separate instructions depending on whether the losses are needed for any specific year or not? Just enter on line 21 and if they're needed they offset the income and if they're not needed they continue to carry forward.

[Pacun]

I don't understand why you are saying that the program is adding the NOLs from 2011 and 2012 together. Was the 2011 NOL shown on the 2012 return on line 21, and then that is part of what is creating the NOL for 2012?

I have that same issue too. The program is automatically adding previous years losses and dumping them on line 21 as a negative number. It is my understanding that you only can deduct losses in the following years only if you elect not to go back and amend previous years but ATX doesn't care if you missed your window of opportunity and didn't make the election.

If a preson has rental losses for $30K (25K deductible) each year for 2010, 2011, 2112 and this year you have passive gains, you will have have -15,000 on line 21. Is this correct? I mean, do we have to make an election or we can take the loss when we sell the rental property?

I have noticed that negative number on line 21 ONLY after the last upgrade to ATX.

[RitaB]

OK, let's get back to me here. (Just kidding, Pacun).

I thought you only put a NOL on line 21 if you are going to use it on the return you're doing. And you put only the amount you are using. I thought it was in the Instructions to Pub 536, but I can't find it.

[kcjenkins]

Even if you can't use it, it's there to keep the carryforward data consistent.

[jklcpa]

KC is correct, BUT the ATX program or any program will not know if the loss from the prior year was carried back and used in some preceding year, so you have to check the numbers, and if those losses were used, then they shouldn't be carried forward. You would have to make a manual entry to tell the program how much has been used, if any.

[RitaB]

Well, I found this finally, I gotta say, I think it'll be ok either way, and IRS knows less about it than I do:

[joanmcq]

If you've already carried back the losses, you'd roll over the amended return and then the problem is solved. The correct NOL will roll forward & show up on line 21. Then do the worksheet, and the correct carry forward will go towards next year.