2009 NOL

[mwpope]

I have no experience with NOLS but one of my taxpayers found himself in that postion in 2009 with a 6K NOL. Is it possible to go back just one year or do you have to go back 3 (I know 5 is now an option). What "elections" do I make on 2009 to go just one year? If I go back one year can I just prepare a 1040X with the NOL on 1040 line 21 or do I need to prepare a 1045? From what I read, a 1040X is OK but I don't trust the extensiveness of my reading.

[Kea]

I don't think going back only one year is an option. One of the easiest choices is to carry forward to next year. No amendments & no 1045s. But no refund this year, either. They would just have lower taxes next year. May want to consider what their tax rates were 3 & 5 years ago vs what it might be for 2010.

Good luck.

[OldJack]

Unless you elect to forgo the carryback you have to carryback 2 years unless you qualify to carry back further. If there is no tax refund in the 2nd year you then carry forward to the 1st year. I would use form 1045 instead of 1040X. Form 1045 is designed to do a carryback. I actually take the NOL to the prior 2 year software and enter the NOL on line 21 and let the software calculate the tax to compare with the original tax. It makes life much easier.

[Terry D EA]

Interesting conversation. Old Jack is the 5 year carry back option only available for 2008? The required 2 year has been the only options until the change this fall with 08. This a need to know situation for me.

[mwpope]

Interesting conversation. Old Jack is the 5 year carry back option only available for 2008? The required 2 year has been the only options until the change this fall with 08. This a need to know situation for me.

[mwpope]

Here is the website I was reading last night that talks about the 5 year: http://www.journalofaccountancy.com/Web/20092360.htm. I just wouldn't recommend reading a Revenue Procedure at 3:00 AM.

NOV. 23, 2009

The IRS on Friday provided guidance on the new expanded five-year net operating loss (NOL) carryback rules, which were recently amended by the Worker, Homeownership, and Business Assistance Act, PL 111-92. The guidance is contained in Revenue Procedure 2009-52, and it explains how a taxpayer elects to carry back an NOL for three, four or five years.

In February, the American Recovery and Reinvestment Act, PL 111-5, amended IRC § 172 to allow eligible small businesses to carry back 2008 NOLs for a period of three, four or five years (instead of the usual two-year limit). The Worker Act expanded this treatment to include NOLs incurred in 2009 and allowed all businesses—not just eligible small businesses—to make the election. The Worker Act limits the amount that can be carried back to the fifth year to 50% of the taxpayer’s taxable income for that carryback year. The election is not available to TARP recipients or members of a TARP recipient’s affiliated group.

A taxpayer makes the election by attaching a statement to the taxpayer’s return (or amended return) for the tax year in which the NOL arises. Details are provided in section 4 of the revenue procedure.

The election must be made by the return filing due date (including extensions) for the taxpayer’s last tax year beginning in 2009. The election is irrevocable.

[Terry D EA]

That is what I was lookikng for. Thanks!!!

[OldJack]

Remember, some states may not allow more than a 2 year carryback.