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NOL Explanation Statement

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#1 BulldogTom

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Posted 15 March 2011 - 08:52 PM

New one on me. Client has an NOL carryforward from a prior year that is used up this year. When I create the e-file, I get a red error stating an NOL explanation statement must be completed when and NOL carryforward is present? So when I click on the red error,it takes me to the statement.

What the HECK am I supposed to explain? They have a carryforward from a prior year and are using it in this year to offset income.

I am thinking of putting "Take a look at line 21."

Is this something new? I cannot ever remember seeing this before? Anyone have some verbage that the IRS is expecting to see on that explanation statement.

Thanks

Tom
Lodi, CA

#2 RitaB

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Posted 15 March 2011 - 11:09 PM

New one on me. Client has an NOL carryforward from a prior year that is used up this year...I am thinking of putting "Take a look at line 21."


Seriously! I have done two this year, and I searched briefly for some intelligent sounding "pursuant to blah, blah," something to put on there. Finally, I realized this apparently wouldn't even be happening with a paper file, so I decided, "Just put SOMETHING, and move on, Rita!" So, I entered "2008 NOL Carryforward = $xx,xxx" or something equally dazzling.

I felt like saying what you thought: "Duh, do the math."

#3 TaxCPANY

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Posted 16 March 2011 - 12:37 AM

Despite the aggravation -- and, hey, aren't we all feeling pretty fried, now -- I *always* nice-it-up with: "Taxpayer incurred a net operating loss in XXXX, that was not exhausted in carrying back to prior years [cite specific year(s)] (or did not elect to carryback, and, then, "persuant to IRC (& now I tank the cite)"), resulting in the current, carryforward amount of $ x."
*ALWAYS* has worked for me, without inciting subsequent notice/audit.
My best mentors taught me to always supply 'more' than enough data for any examiner to fill the folder he/she would have to show his/her superior, should he/she get grief for not collecting what 'the computer' wanted. I.e., examiners have to 'answer' for the outs we practitioners want for our clients; fill their folios with enough to swamp their bosses.
VTY, TaxCPANY

New one on me. Client has an NOL carryforward from a prior year that is used up this year. When I create the e-file, I get a red error stating an NOL explanation statement must be completed when and NOL carryforward is present? So when I click on the red error,it takes me to the statement.

What the HECK am I supposed to explain? They have a carryforward from a prior year and are using it in this year to offset income.

I am thinking of putting "Take a look at line 21."

Is this something new? I cannot ever remember seeing this before? Anyone have some verbage that the IRS is expecting to see on that explanation statement.

Thanks

Tom
Lodi, CA



#4 rfassett

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Posted 16 March 2011 - 05:41 AM

My explantion has consisted of a brief "net operating loss carryforward from 2009". They want to play "stupid"? - I am getting pretty good at that game!

#5 RitaB

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Posted 16 March 2011 - 08:56 AM

My explantion has consisted of a brief "net operating loss carryforward from 2009". They want to play "stupid"? - I am getting pretty good at that game!


Yeah, just try to be more stupid than us! We got this.

#6 joanmcq

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Posted 17 March 2011 - 01:56 AM

foreign tax credit carryforwards have required some kind of statement since I've been doing them for one client which is since I've been a preparer using ATX. same thing; I just put a statement in there that says something about the c/f.

#7 michaelmars

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Posted 17 March 2011 - 09:37 AM

foreign tax credit carryforwards have required some kind of statement since I've been doing them for one client which is since I've been a preparer using ATX. same thing; I just put a statement in there that says something about the c/f.


i too just say "from prior year" duh

#8 jainen

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Posted 17 March 2011 - 11:34 AM

>>They want to play "stupid"? <<

Who are "they"?

At the risk of once again sounding like a shill for the IRS, I will point out that our public servants have made it perfectly clear to us what they need. "Deducting a Carryforward... You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction. If you deduct more than one NOL in the same year, your statement must cover each of them."

In my opinion, that is excellent communication. I don't think it's stupid for them to expect professionals to read and follow simple instructions.

See page 9 at this link: Pub 536.

#9 rfassett

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Posted 17 March 2011 - 12:19 PM

I think we all know who "they" refers to. And I will stand by my comment. If they want to play Stupid...
All they will have to do is refer to the info we have already provided in the prior year return(s). I have enough to do this time of year without having to be supply redundant information. And if that makes me less professional, as you suggest, then so be it. Call me "less professional".

#10 jainen

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Posted 17 March 2011 - 01:43 PM

>> refer to the info we have already provided in the prior year return<<

You're kidding, right? Why in the world would you want an IRS agent to pull your client's prior year return? What do you tell your clients? "I don't bother following the IRS instructions, because they should just go back and take another look at last year's return."

#11 rfassett

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Posted 17 March 2011 - 01:56 PM

Not kidding even a little bit. In my nature of "less professionalism" I prepare a solid return EVERY year. "They" (the same as referenced before) are more than welcome to look at prior year returns. I do believe you are making this sound more serious than it is. Do you REALLY think an agent would pick up my client's return just because of that statement?

I tell my clients that I prepare all returns in accordance with the Internal Revenue Code and the regulations promulgated therefore. Well, not quite like that. I tell them that I will prepare their return in a manner that most benefits them in accordance with the law. Whats more, I sign every one of the returns that I prepare with a statement that the return that I have prepared is true and accurate blah blah blah.

And lest you accuse me of talking out of both sides of my mouth. You and I both know that the instructions are not law. So please don't go there.

#12 2ACCT4

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Posted 18 February 2012 - 12:40 PM

>>They want to play "stupid"? <<

Who are "they"?

At the risk of once again sounding like a shill for the IRS, I will point out that our public servants have made it perfectly clear to us what they need. "Deducting a Carryforward... You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction. If you deduct more than one NOL in the same year, your statement must cover each of them."

In my opinion, that is excellent communication. I don't think it's stupid for them to expect professionals to read and follow simple instructions.

See page 9 at this link: Pub 536.



In case someone has any confirmed guidance on this, i wanted to clarify that i have the statement that shows all the important facts about the NOL and the computation as you so kindly point out they are asking for above, and i am still getting the error diagnostic wanting further an explanation statement specifically for the electronic file.. Has anyone found out what to do here with any certainty??

#13 kcjenkins

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Posted 26 February 2012 - 05:54 PM

Then just put "See attached worksheet of NOL carryover computation"





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