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Tina, Lawyer
Category: Legal
Satisfied Customers: 8775
Experience:  JD, BBA Over 25 years legal and business experience.
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Note: best person to answer is probably a tax lawyerI have

Customer Question

Note: best person to answer is probably a tax lawyer
I have a client who had a $600,000 NOL (loss) in one business in 2011 that his CPA applied to reduce his personal income for 2011 to zero. There was another $200,000 not used. The CPA did not do a carry back or a waiver so a carry forward could be done. It is now 2016. The IRS, as I understand it, will not do a refund on a 2010 carryback, And he cannot do a carry forward. So he lost a potential $200,000 deduction. This probably will cost the client $55,000. Is there any way out of this???? Now he had hired a CPA to do his 2011 taxes. Then did his own taxes via Turbo Tax in 2012. He came to me this year. I am an EA. I consider it gross negligence for a CPA to do neither a carryback or waiver. I have copied the text of what CPA wrote him in 2016 below. Is the CPA liable for this? Is it worth a lawsuit against CPA? I realize you have limited data and can give no guarantees. CPA text below.We prepared your 2011 tax return. It had a loss on it as you are aware. Under federal law a net operating loss must be carried back two years, and then forward up 20 years if not used in the earlier years. Evidently you (or someone you retained) carried the loss forward rather than back. The IRS is not allowing that. We prepared the 2011 return on or about April 15, 2012.
You need to check with the IRS to see if the statute of limitations allows a carry back at this point since there is a 3 year period where returns are open. Assuming they agree to have you resubmit your refund claim, carry it back to 2010 and then 2011.
Submitted: 1 year ago.
Category: Legal
Expert:  arubin9 replied 1 year ago.
I'm going to opt out, as this is a legal question, rather than a tax law question. However, the deadline for waiving the carryback is the extended due date of the 2011 return (which the CPA may not have known; he may have thought it was locked in with the original filing); and the carryback cannot be taken after the SoL expires on the 2011 return. Whether legal action is appropriate is a _legal_ question, rather than a _tax_ question.