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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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Is it negative income balance ceare over to the next year Yakov

Customer Question

2003 we have negative income -$80,000. For 2004 our incom was $31,798.Are we responsible for paying taxes for year 2004? Thank you . Yakov
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

You need to go to www.irs.gov and get the 2003 version of form 1045.  You need to complete schedule A to determine if you have a deductible net operating loss.  Generally,to the extent you have a net loss from a business activity (i.e. schedule C or from a partnership in which you actively participate) you may have a deductible loss.  If your loss is entirely from Schedule A deductions (other then casualty loss deductions), then you do not have a deductible loss.


However, after you complete schedule A of form 1045, you will have determined your deductible loss if any.  Do not file form 1045 as the time has already passed for filing it.  Unless on your 2003 return you affirmatively elected to forego a net operating loss carryback, you must carryback any net operating loss (NOL) to the two previous years (i.e. 2001 and 2002) before you may carry the loss forward to 2004.


If as a result of filling out schedula A of the 1045 you have determined you have an NOL, and you had taxable income in 2001 and 2002, then you need to file an amended return claiming the loss against those years (2001 first, then 2002).  Of course you will receive a refund to the extent your taxable income was reduced or eliminated.  If after applying your NOL to the two previous years you have NOL left over, you may use it against your 2004 taxable income.

     
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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