Amend for NOLs prior to 2015?

[Joe Greaney]

Folks, a client of mine  had NOL losses every year for 2008 et seq. which were not claimed on LIne 21 of Form 1040 each year. I am preparing 1040Xs for 2015 (the earliest year permissible) to 2017 to correct the omission. Statements of waiver of the carryback were filed each year with the original 1040s as required.  Is it permissible to include the aggregate of the NOLs for 2008 to 2014 (with an explanatory note regarding the NOLs for each year) on the 2015 Form 1040 X ?

Any assistance with this would be gratefully appreciated.

 

[Abby Normal]

11 minutes ago, Joe Greaney said:

Folks, a client of mine  had NOL losses every year for 2008 et seq. which were not claimed on LIne 21 of Form 1040 each year. I am preparing 1040Xs for 2015 (the earliest year permissible) to 2017 to correct the omission. Statements of waiver of the carryback were filed each year with the original 1040s as required.  Is it permissible to include the aggregate of the NOLs for 2008 to 2014 (with an explanatory note regarding the NOLs for each year) on the 2015 Form 1040 X ?

Any assistance with this would be gratefully appreciated.

 

No because some of the NOL might have been used in those prior years (2008-2014) and would not be available for 2015. You really have to redo ALL of the returns, whether they're being filed or not, or at least do the NOL worksheet for every year.

[Joe Greaney]

Thank you Abby . I might just clarify that  all of the 1040's  submitted for 2008 et. seq have been examined and it s clear that the NOLs for each year were unused and available for carry forward. If the answer is still 'No', I take it that all of those pre 2014 NOL's are lost?

[Joe Greaney]

I'd be grateful if anyone could clarify that having examined the computations carried out on Schedule A of Form 1045 for all years 2008 et seq. and satisfied myself as to their correctness, whether it is in order to include the aggregate of the forward carried NOLs for 2008 to 2014 on the amended return 1040X being submitted for 2015.

Any views on this would be greatly appreciated.

[jklcpa]

I disagree with your assumption that the NOLs are "lost."  The purpose of amending a return is to properly report any items of income, deduction, additional tax, or credit that wasn't properly claimed on the original filing, and in your client's case of individual NOL carryforwards starting in 2008, those do have the potential to still be available coming into 2015. 

I agree with Abby Normal that you must calculate each year starting with 2008 coming forward to determine how much, if any, of the NOLs were used in the years prior to 2015.   Then, the 2015 amended return may be filed to correct what should have been reported on line 21 had the original return been prepared correctly to begin with.  You should include a summary statement showing each year's loss sustained, how much (if any) was applied and used in earlier years, and the amount from each tax year that is still available for carryforward that comes into the 2015 tax year.  Behind that, I'd include the detailed worksheet calculations that pertain to each of the years prior to 2015 that tie to the summary with each clearly marked as worksheets for the prior year losses.

After you make all of those calculations for regular method of tax, then you must redo all of it for AMT and attach that also.  It is NOT sufficient to make a statement that the taxpayer was never subject to AMT in any of the years...the IRS will want these calcs.  The IRS may reject the amendment outright, and what happened with one return where I did have the AMT calcs included, it sent the entire filing back marked up with a highlighter where it believed I had either an error or omission and requested correction or the additional data.

Below is what my software produced for a client's NOLs coming into 2015, and it also produced a similar statement for AMT purposes for that year. 

 

[Joe Greaney]

Thank you so much for your detailed assessment of the position. My reason for believing that NOl's prior to 2015 might be lost was in view of the rule whereby 1040's as far back as  2015 only can be amended currently (and back to 2016 only after tomorrow!) where refunds or credits would arise. In the current instance it is in fact the case that no refunds or credits will arise for any year back to 2008 as a result of the amendments or indeed back to 2002 if amendments that for back are permitted. The purpose of the amendments in this case is to ensure that the just quantum  of  Net Operating Loss carryforward will be available into the future. Is it the case therefore that where refunds or credits won't arise for any year as a result of the NOL carryforward related amendments one may amend original 1040s even further back than 2008, even to say 2002?

Finally, would it be permissible in this instance instead of amending the 2015 return to show the correct accumulation (i.e. aggregation) of NoL carryforwards up to and including the 2015  return (as well as amending the later 1040s similarly)  to instead amend the most recently filed return (for 2017 or perhaps 2018, if the requisite work cannot be carried out by tomorrow's deadline) and support the 2017 (or 2018) filing with the supporting calculations, summaries and worksheets you specified. so that in this  instance the 2017 (or 2018) amended return may be filed to correct what should have been reported on line 21 had the original return been prepared correctly to begin with. This particular query is prompted by the fact that If there is no restriction which confines the filing of amended returns  in cases such as this  to the last four years, then choosing to adjust the 2015 return instead of the 2017 (or 2018) return appears arbitrary and perhaps unnecessary?

[jklcpa]

Are you a tax professional?  If so, where are you located?  Your IP address indicates that you are in Ireland.

[Joe Greaney]

Yes, I was NYC based but presently am in Dublin, Ireland.