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Anne
Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I have a client that has a Net operating loss carryforward

Resolved Question:

I have a client that has a Net operating loss carryforward from 2010 to 2011 on their 1040 as a result of losses from an S-corp.
Line 22 of the 2011 1040 shows a loss as well as line 37. What line do I use to show the carryforward for 2012.
Submitted: 11 months ago.
Category: Tax
Expert:  Megan C replied 11 months ago.

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

According to the IRS publication 536, the carryforward amount should be on the "other income" line of the tax return, which for 2012 was line 21

MyVirtualCPA :

http://www.irs.gov/publications/p536/ar02.html#en_US_2012_publink1000177402

Customer:

Yes I undertstand and it is. However for 2012 line 21 is combined with the lines above to give you line 22. Do I use line 22 as the carryforward to 2012 or line 37

MyVirtualCPA :

I'm sorry, I misunderstood your question. I thought you were only asking where to put the NOL, not how to calculate it.

MyVirtualCPA :

As such, I will need to step out and allow another expert to assist.

Customer:

ok

MyVirtualCPA :

Please stand by

Customer:

ok

MyVirtualCPA :

Please don't respond, as this slows the process of getting your question to another expert

Expert:  Anne replied 11 months ago.
Hi

Thank you for your question.

The short answer to your question is you START with the NOL as it is entered on line 21

When you calculate the $ amount of the NOL that you will carryover, you will follow the instructions for Form 1045 Schedule B. which first wants you to enter the AGI WITHOUT the NOL, and then in the next column, you would enter the AGI WITH the NOL.
(which would be on line 21)

You must do all of the steps found on Schedule B of the 1045 form, since there are adjustments that must be made for personal exemptions, and possibly some Schedule A adjustments also.

Here is a link to the instructions (Remember to find Schedule B)

http://www.irs.gov/pub/irs-pdf/i1045.pdf

and to the 1045 form itself

http://www.irs.gov/pub/irs-pdf/i1045.pdf

There is no place on the 1040 itself that will show the NOL carryover from 2011-2012. Those adjustments are made, and carried through the 1045 form .

However, the NOL will always be less each year than it was the year before, if for no other reason than you must adjust it by the personal exemptions.

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

 

Customer: replied 11 months ago.

The previous accountant used line 21 only and wrote NOL carryforward no 1045 form was used

Expert:  Anne replied 11 months ago.

Is it possible that there is a worksheet for the NOL in with the client papers?

That's generally what I see, is a worksheet showing how they calculated the carryover.

Expert:  Anne replied 11 months ago.
The 1045 instructions tell you to file the 1045 Schedule B worksheet

See below:


CarryoverComplete and file this schedule to determine the NOL deduction for each carryback year and the amount to be carried forward, if not fully absorbed. Make the same entries in each column heading as on page 1 of Form 1045 (see the instructions for Lines 10 Through 27 earlier).In most cases, if an NOL is more than the modified taxable income for the earliest year to which it is carried, you must file Schedule B to figure the amount of the NOL to be carried to the next tax year. The amount of the carryback is in most cases the excess, if any, of the NOL carryback over the modified taxable income for that earlier year. Modified taxable income is the amount figured on line 9 of Schedule B
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1681
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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