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Casualty Loss on Sch A in Natural Disaster area declared by…

Casualty Loss on Sch A...
Casualty Loss on Sch A in Natural Disaster area declared by President. House and furnishings damaged by winds and rains. I have read an NOL can be carried back, but this is on Sch A. I see the deduction can be taken in prior year or year of loss. Both years have been filed, so I would need to amend the chosen year. How should I do this return or returns?
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Answered in 21 minutes by:
10/10/2016
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,030
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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When your loss deduction is more than your income, you may have a net operating loss (NOL).

You need to decide whether to carry the NOL back to a past year or to waive the carryback period and instead carry the NOL forward to a future year.

If you carry back your NOL, you can use either Form 1045 or Form 1040X and amend. You can get your refund faster by using Form 1045, but you have a shorter time to file it.

You can apply for a quick refund by filing Form 1045. This form results in a tentative adjustment of tax in the carryback year.

If you do not file Form 1045, you can file Form 1040X to get a refund of tax because of an NOL carryback. Generally, file Form 1040X for the carryback year within 3 years after the due date.

If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the “Other income” line of Form 1040 (Line 21).

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Customer reply replied 1 year ago

I am wanting to know about a Casualty loss. An IRS printout FS-2009-8 mentions a five year NOL carryback for natural disaster losses. The casualy loss in question is non business. Is there a way for that to cause an NOL you are referring to? The taxpayer is wanting to carry back a casualty loss from a natural disaster. I do see where they have a choice of using the Sch A deduction on prior year or year of loss.

Yes it can. If your loss was so much that it was greater than your income for the year that would generate an NOL.

If you are just wanting to show the loss then that goes on Schedule A the year of the loss. After that you would see if their loss is more than the income for the year. That would then mean an NOL.

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If they want to deduct it in the previous year then amend teh 2014 return and apply the loss as you normally would.

If you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened.

A list of the areas warranting public or individual assistance (or both) under the Act for 2015 is available at the Federal Emergency Management Agency (FEMA) website at www.fema.gov/disasters.

Make certain the area is on the list.

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Customer reply replied 1 year ago

How do I get the excess from a Sch A deduction to Ln 21 of the 1040 as an NOL?

You first do the return and show the loss on Schedule A. Complete the return and see if the income is totally eliminated by the loss amount. That is then a Net Operating Loss. You do not do anything on the return that the loss is generated. The NOL does not get shown on that year again. It is already shown by having more deduction than income.

Then you carry the loss back two years and apply it. If you use it all up that is it. You will see a refund form the older year. If you have any more then you go to the next year. These are 1040X returns.

It goes on line 21 of a carry forward year.

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Customer reply replied 1 year ago

I know if we have a carryforward for charitable contributions, it goes to the next year on Sch A. I looked at the 4684 casualty loss and the bot***** *****ne goes to Sch A. Do I manually subtract Sch A deductions from AGI and put that negative number on 21 of carryback year? I am not seeing the road to line 21 of carryback year.

The 4684 does go on Schedule A.

No if you carry back the loss instead of just carrying forward then you amend the return and apply the extra loss (the amount that was not used up in 2015) to the 2013 year.

When you carry back you do not use line 21 at all.

When you started you wanted to know if they could just go to the previous year because it was in a disaster area. If the loss was in 2015 then you can amend the 2014 and apply the casualty using the 4684 and the Schedule A.

If you are going to claim the loss though in 2015 and there is a NOL then you have a choice. Carryback first (2 years) then carry forward.

Lets get back to when was the casualty and when do you want to claim it (providing this was a federal disaster).

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Customer reply replied 1 year ago

The loss was in 2015. It is on the list.The loss is like $40,000. The instructions on IRS mentioned the NOL and carryback 5 years due to the Natural Disaster. A partial was done on the 2015 tax return. The T/P came up with more of a loss. So, either way, I have to amend 2015 to remove it and move it all to 2014. or amend 2015 to increase it. I read some more I'm guessing if like you said the Sch A deductions (and exemptions) are more than income, I will put the difference on the NOL worksheet in the year I am carrying back to, then go to the 1045. Is all that right? The client has read up on it also, and I want to explain it to him.

If you are going to amend 2015 then yes you can remove the partial amount and move to 2014 or you can increase the loss on the 2015.

If the income was more in the previous years then using the receding year will benefit them more for the casualty.

If there is an NOL then deal with that because it is a separate issue.

The 1045 is needed if you carryback and NOL yes.

Get them to decide now what year they want to start this with for the casualty. If it is 2015 then fine (amend and increase). If there is an NOL because of the loss then they can decide do they want to carry any extra back or just forward.

Robin D.
Robin D., Senior Tax Advisor 4
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Experience: 15years with H & R Block. Divisional leader, Instructor
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