NOL Carryover

[Yardley CPA]

Client owns Schedule C Landscaping Company.  That is the only activity on his 1040.  He is filing as Single with one dependent..  In 2014, Schedule C showed loss of -$47,587.  This year the loss is $-12,973.  ATX is showing Line 21 as Net Operating Loss Carryover of $-46.837.  Is that correct?  Should the carryover be populating against a loss?  Line 22 of this years return totals -$59,810 (-$12,973 + -$46,837).

[kcjenkins]

Sounds about right.  Did you check the nol carryover worksheet?

 

[michaelmars]

Single?  HOH?   I would be more worried about how he is supporting himself and daughter with no income.  Is he living with someone that supports them?  Any interest income to show he has money in the bank?  While I always say I am not the IRS and I don't audit my clients, I do bring up issues they need to answer.

[Yardley CPA]

Michael...I do not audit my clients either but always have professional skepticism in mind as I prepare returns.   I do offer my professional option and in this specific case I have asked appropriate questions.  He is aware of my position and he has offered his explanations of his current situation.  With that said, I was looking to find out if the program is correct in populating a NOL on line 21, even though he also has a loss this year.  I have little experience with these types of losses and just wanted to ensure the program was performing correctly.  Not sure if any type of election needed to be made or if should be populating line 21 as it is.

Thank you again for your feedback.

[JMovichEA]

The 2014 carryover should show on line 21, even though there is a NOL for this year. Are you electing to carryforward the 2015 loss?

[jklcpa]

The 2014 c/o should show on line 21 IF the taxpayer made the election on the 2014 return to carry the loss forward, otherwise it must be carried back 2 years before any carryforward can be considered.

[Yardley CPA]

Thanks very much for the replies. Yes, electing to carry forward the 2015.  Can someone provide a brief explanation on what would have happened had it been carried back two years?  Had there been a gain in those two years, would an amended return need to be filed to recognize the loss?

[Joel]

If there were regular taxes paid in those 2 years, then the taxpayer would have received back that payment based on the 1045 form.

[BulldogTom]

On ‎4‎/‎17‎/‎2016 at 1:26 PM, Yardley CPA said:

Client owns Schedule C Landscaping Company.  That is the only activity on his 1040.  He is filing as Single with one dependent..  In 2014, Schedule C showed loss of -$47,587.  This year the loss is $-12,973.  ATX is showing Line 21 as Net Operating Loss Carryover of $-46.837.  Is that correct?  Should the carryover be populating against a loss?  Line 22 of this years return totals -$59,810 (-$12,973 + -$46,837).

You need to go through the NOL Worksheet to verify your numbers.  Make sure all your deductions are correct for Business versus personal.  Only then can you verify that the carryforward to 2016 is correct. 

In 2014, you should have either elected to carry the loss to 2015, or filed a 1045 to carry the losses back to 2012 and then 2013.  If you did not make the election to carry forward, you should prepare the 1045 and see if all of the losses are absorbed in 2012 and 2013.

Tom
Newark, CA

[Yardley CPA]

Thanks very  much for everyone responses.