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I am a CPA but need some weekend advice. I have a client who

Customer Question
will report a lot of...
I am a CPA but need some weekend advice. I have a client who will report a lot of income in Year 4. I have until Tuesday to amend Year 1 (and some more time to amend Years 2 and 3) to help reduce Year 4 income. Years 2 and 3 were loss years. In Year 2, I did not elect to forego the NOL carryback so I need to use that by Tuesday. I want to amend Year 1 in other ways as well as use the 1120X to capture the carryback. Can I do that? The amount of carryback is contingent upon a Year 2 amendment. Years 2 and 3 have to change because Year 1 changed. Help me think through this and make sure I can do what I want to do. Do I need to file a Year 2 amendment simultaneously with Year 1 to have everything accounted for?
Submitted: 1 year ago.Category: Tax
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Customer reply replied 1 year ago
1120 and 1120X for the record.
Answered in 16 minutes by:
11/12/2016
Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago
ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 714
Experience: Business Consultant/Accounting Manager
Verified

With a carryback, the NOL is first carried back to the two tax years preceding the loss year (in this case, Year 1).

If Year 3 was not carried back as of yet - you would use that first and amend it, if applicable. Then, you would amend Year 2. After, Year 1. As you know, you have only 3 years from the return year to amend. You would need to either send all of the returns at once (Year 1, 2, &3). They need to process them all together or start with Year 3, then Year 2, etc.

Hope this helps.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

Remember - You would need to make an adjustment to the carryback year on the 1120X. Add the amount of the NOL carryback to the total deductions line so the taxable income is refigured. Then complete the 1120X based on the difference in tax for the carryback year. You also as you mentioned need to send in a copy of the original returns for both carryback year and the NOL year, but be sure to write "Copy Only--Do Not Process" at the top of each form or schedule.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

Let me know if you have any questions. Thank you.

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Customer reply replied 1 year ago
I'm not sure we are on the same page. Year 0 I believe has a loss. (I don't have that return (yet)). Year 1 needs to be amended. Year 2 needs to be amended. It will have a loss -- it had a loss before the amendment. That loss needs to be carried back to years 0 and 1. Year 3 needs to be amended and it will have a loss. It had a loss before the amendment. Year 4 will have huge net income. Basically I made a depreciation adjustment in Year 1 that needs to be carried through to subsequent years. If I file them simultaneously, can I do all the amendments. Year 1's amendment changes due to adjustments as well as an NOL carryback. Year 2 has to be adjusted because I adjusted Year 1 depreciation. I assume this has to be carried through. Does all that make sense?
Customer reply replied 1 year ago
I do have an additional question...I only have until Tuesday to amend Year 1. Does this mean I cannot carry back to Year 0 since the window for doing an 1120X and an 1139 is gone? I think the loss is around 20k for year 0. I'd love to NOT have to apply the loss to year 0 if possible, especially since I don't have the return. Or does it mean I lose that portion of the carryback? Help!
Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

Hi. This is the ruling for NOL Carrybacks:

You have at least three years from the date you filed the return that generated the NOL to file a claim for credit or refund to carry the NOL back to the two preceding tax years.

So, you can carry it back to Year -0-.

You can also waive the carryback and carry it forward instead.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

Let me know if you have questions. If not, a positive rating is very much appreciated. Thank you.

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