Nol Carryforward

[blady]

I need some help, please! I have a client that brought me his 2003, 2004 and 2005 tax information so I could prepare those returns. My problem is that he has a Schedule C loss of $21,783.00 giving him an NOL on his 2003 return. I am trying to figure out how or even if I can show this as an NOL carryforward on the 2003 return and have it automatically show up on his 2004 and future returns until the loss is used up. He had wage income in 2003 of $5577.00 so aren't you limited to the wage income as far as losses on the 1040 line 12 and then put the remaining loss of $16206.00 from the Schedule C on the Schedule D so it will carryforward? How do you do this in the program? Also what specific deductions are allowed on the 2005 return in regards to Hurricane Katrina and Rita? He ownes a house in Beaumont, TX. I have not had ANY experience dealing with this issue for any other clients. I do not want to have to try to amend these returns later if I don't report all the legal deductions he is entitled to now, because I couldn't figure out how to find theses things in the program. Thank you in advance for any and all help I can get with these matters.

[kcjenkins]

No, you are totally misunderstanding the NOL rules. First of all, you do not limit the loss in the year it occurs. It's reported in full on the 1040, and then IF you make the ELECTION to forgo the carry-back period, the remaining NOL, as calculated on the NOL worksheet, is carried forward to the next year. You need to read Pub 536 before you do anything else.

Also, read Pub 4492 for information on the Hurricane tax relief.

http://www.irs.gov/publications/p4492/ix01.html

[Maribeth]

AND the election to carryforward the NOL can only be made on a timely filed return. Your 2003 return is delinquent so you do not have that choice. You will need to carryback the 2003 NOl to determine how much would have been used even though you won't have a refund from those carryback years. Then you will have the amount that is available for carryforward. And the carryforward does not go on Schedule D. It is included on Line 21.

Maribeth

[kcjenkins]

That is correct, which was one reason I directed him to read Pub 536. I really think he needs to do some study before he even thinks about trying these returns. But everyone has to start somewhere, and having a real life example to work with is the best way. And getting paid at the end of a learning experience makes it even better! And doing it now, with less time pressure, is a good thing.

Blady, feel free to come back with questions once you get through reading those pubs. There are lots of people here who are happy to help a newbie. As long as you want to learn and expand you are welcome here.

[blady]

Ok, thanks, kcjenkins and Maribeth! Both of you were a great help. My problem was with the Schedule D losses. All I had to do was pull up the NOL Worksheet for each year and it was right there. I have it all straightened out now. I was confused as to where to report the carryforward loss from 2003, I thought ALL losses were reported on the Schedule D. But once I realized the NOL is worked out on the NOL Worksheet, with your help, it all fell into place. Thank you!

[TAXBILLY]

This is what I like about this board!!

taxbilly