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We have a NOL carryover on our federal income taxes. While I…

We have a NOL carryover...
We have a NOL carryover on our federal income taxes. While I was working on our taxes this week, I noticed an error was made in 2013, 2014 and 2015 in the calculation of the NOL carryover. I neglected to account for my wages in item 7 of Form 1045 Schedule B. Can I somehow adjust for this error with our 2016 taxes instead of filing amended returns for three years? It doesn't affect anything we owe - just the carryover loss should have been larger each year. Can I add a statement and make a line item for the adjustment on line 21 of 1040? Any other suggestions?
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Answered in 11 hours by:
9/16/2017
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,011
Experience: 35 years tax experience, including four years at a Big 4 firm.
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Simply revise the NOL carryforward to reflect the error, and use the reduced amount for the 2016 filing. We do this in practice when errors are found.

Attachments are not needed, but explanatory narrative is suggested. That means e-filing will require adding a statement to support the carryforward. No income adjustment on line 21 of the 1040 is needed.

Thanks for asking at just answer. Positive feedback is appreciated. I'm PDtax.

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Customer reply replied 7 months ago
The errors actually create an increased NOL, not reduced. Will I handle it the same way -just adjust for the error in 2016 taxes?

Same methodology. You might want to include page 1 of the old 1040 if it supports the revision.

PDtax

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Customer reply replied 7 months ago
I use turbo tax, so can't attach old 1040s. Should I mention the errors in the carryover statement? Or should I file manually so I can attach previous 1040s?

We use different software, that allows attaching a PDF, like a scanned prior year 1040. I think TurboTax allows it, but I would have to confirm that.

If it does not, a typed out narrative with your new NOL carryforward will likely be plenty.

Please rate when I have answered your questions.

PDtax

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TurboTax does not allow PDF attachment.

If your revision suggests attachment, a paper filing might be best. Otherwise, narrative explaining the revision would be fine.

PDtax

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Customer reply replied 7 months ago
My revision would be on Schedule A of Form 1045. I don't file 1045 since I don't carry the NOL backwards. The only thing that would change on the 1040 would be line 21, where I indicate the carryover loss calculated from Schedule A of Form 1045. Do I need to specifically state I'm increasing the NOL because of a previous error or can I just keep that info with my Schedule A of Form 1045? I want to do this correctly in case of audit, but I don't want to increase my chances of audit....a fine line.

I would disclose the prior error without attachments. This will not cause higher audit risk. If they ask, which they likely won't, you can follow up with paper copies of the revision and support.

I have corrected a few nols, and never been asked to support the error fix. The odds this is to be used to evade tax is very low. I would not be concerned. Simply correct the NOL carryforward with a brief explanation.

PDtax

PDtax
PDtax, Certified Public Accountant (CPA)
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