Net Operating Loss

[cpabsd]

I am confused. I have calculated the net operating loss to carryback. Should the Form 1045 be completed in the 2008 software or 2006 software? I can not seem to figure the form out. Of course, the client is wanting the return as they are hurting for cash. Thanks for any guidance.

[TAXBILLY]

Did the loss occur in 2008? If so then use the current version of Form 1045. Be aware that this past Tuesday the President signed into law a provision to carry back 5 years instead of two for 2008 NOLs only, which may or may not benefit your client. I would imagine they will be revising the form with new instructions.

taxbilly

[cpabsd]

The loss did occur in 2008. The client will be able to use entire loss against 2006 tax year. The additional years willnot benefit this client. I have another question. How does AMT enter into the calculation? In order to prepare amended state returns, I went to 2006 tax year and when I input a NOL on line 21, it calculated AMT as still being due. Is this correct? Does not seem quite right as draft of Form 1045 does not calculate this. The original return does not calculate any AMT.

Thanks.

[Kea]

I have the same situation. When I carry the NOL back to 2006, it kicks in a big AMT. When I get a chance, I will check it against 2004 & 2003. I thought 2006 would be the best because they were in a higher tax bracket that year (lay off and severance pay). But perhaps a different year will work out better.

I'm doing the 1045 in the 2008 software, but I'm doing the calculations (esp AMT) in the prior years' software.

Good luck!

[Joel]

Kea,

With a NOL in 2008 you use the 1045 to go back and calculate the refund from the 2006 and if necessary the 2007 return. It is all done on the 1045 and you do not do a 1040X for the prior years.

[Kea]

I'm not doing a 1040X. I'm just checking the calculations in the old software. There have been a few minor discrepancies between the 2008's 1045 and the 2006's 1040 (after NOL). The NOL is used up in 2006 so I don't need to carry forward again.

The reason I mentioned the other years is that we now have a choice of carrying back the NOL 3. 4, or 5 years (as of last Tuesday). I will check the other years to see which one helps her the most. I'm not sure how long it will take the software to get updated with these options.

[jainen]

>>How does AMT enter into the calculation?>>

The net operating loss must be completely recalculated using AMT amounts for depreciation, deductions, and everything else for both the NOL and carryback years. This is one reason why better software is better.

[Catherine]

I'm not doing a 1040X. I'm just checking the calculations in the old software. There have been a few minor discrepancies between the 2008's 1045 and the 2006's 1040 (after NOL). The NOL is used up in 2006 so I don't need to carry forward again.

The reason I mentioned the other years is that we now have a choice of carrying back the NOL 3. 4, or 5 years (as of last Tuesday). I will check the other years to see which one helps her the most. I'm not sure how long it will take the software to get updated with these options.

I had thought I was done with a NOL (and I also go back and re-check calculations against the prior-year software results), but now with the new law I guess I have to wait, too, and see if an earlier year helps these folks more. Sigh.

Catherine

[Kea]

I think we are going to see more NOLs (and unemployment compensation) this season and maybe next. I've been doing taxes 12 years and had done NOLs for 2 previous clients. So far this year, I've already got 2 more -- one a new client with a carry forward from last year, and the 2nd is the one mentioned in an earlier post. I may be getting another - a friend of mine does her own taxes, but had an NOL on last year's return (2007) and wants me to do that part for her.

I guess NAPT had good timing when they offered an NOL refresher with their 1040 update class last year.

[Catherine]

<snip>

I guess NAPT had good timing when they offered an NOL refresher with their 1040 update class last year.

An NOL refresher sounds like a good idea. However, by the time any of us get any free time for one, we'll have become experts through our latest real-time course at Hard Knock University!

[RoyDaleOne]

Just to be sure there are two NOLs, regular and AMT.

[Kea]

In the year of the NOL there is only one NOL (I think). Bat we are referring to is the year of the carryback (or carryforward). The NOL is an AMT adjustment. So the new tax has to be calculated regularly and AMT.

(I'm glad I took that NOL update class last December!)

Hope that helps.

[RoyDaleOne]

So the NOL is not of a sufficient size to generate an AMTNOL.