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which way is simpler if NOL

Posted: Mon Nov 12, 2018 9:44 am
by ketanco
if we have a NOL, as far as i understand we have two options:

1-default is to start carry back period from 2 years before, which requires you to file amended tax returns for the past years along with form 1045 for NOL (and which form would that be? 1045?)

2-or , when you file that tax return which has the NOL incurred, you attach a statement to that tax return saying:" Per section 172(b)(3) I want to start using NOL in the following year, instead of carrying it back 2 years" (is that it?) .. and then, next year you do it on your next year tax return right? (and what do you do exactly to show it by the way?) of course if you go this route you can not efile i assume, since you must attach statement right?

of these two options, second one seems a little simpler, as we do not have to amend any past tax returns, and instead we can take care of it starting future years.

can you confirm if my understanding is correct?

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 10:44 am
by MarkNYC
Under the new tax law, individuals (except certain farmers) who generate Net Operating Losses after 2017 can no longer carry the loss back. The NOL must be carried forward.

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 11:10 am
by ketanco
thanks and after seeing your post i looked and saw similar news about it. i didnt know this . but the link

https://www.irs.gov/publications/p536#e ... 1000177379

is directly from irs site and it seems they updated it this year and it still talks about 2 year backward . confusing

ok so we carry it forward and how do we take care of it the following year? on which form?

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 11:45 am
by Cuzz35
You also need to look at the new excess business loss rules as those could apply to you as well. Essentially it caps the amount of current year business losses you can take to offset income from other sources (usually wages and portfolio). Essentially business losses over $250k if filing single and $500k if filing married are not deductible in the current year and carryover to the following year as an NOL.

Also, the amount of NOL you can take is capped at 80% of your income before the NOL. This is another change.

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 11:55 am
by ketanco
wait i was talking about individually myself. are you talking about corporations?

and also when i use the NOL in the future year what do i do to show it and deduct it? where what form?

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 12:10 pm
by Cuzz35
ketanco wrote:
Mon Nov 12, 2018 11:55 am
wait i was talking about individually myself. are you talking about corporations?

and also when i use the NOL in the future year what do i do to show it and deduct it? where what form?
Ketanco,

I am talking about individuals. Presumably you have some business or else you wouldn't be generating losses, either from a schedule C business (sole proprietorship), rental property, S-corporation or partnership.

You would use Form 1045, Schedule A to calculate the NOL. At least prior to 2018.

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 1:04 pm
by ketanco
yes schedule C as a sole proprietorship but it means individual isnt it? i mean how else can an individual have NOL?

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 4:01 pm
by Cuzz35
ketanco wrote:
Mon Nov 12, 2018 1:04 pm
yes schedule C as a sole proprietorship but it means individual isnt it? i mean how else can an individual have NOL?
By owning a pass through entity such as an s-corporation or partnership or rental real estate.

Re: which way is simpler if NOL

Posted: Mon Nov 12, 2018 4:10 pm
by 123
NOL = Net Operating Loss