NOL - Allowed or not?

[Edsel]

Filing returns for eight years prior taxes on a volatile income person.  All returns older than 3 years will result in IRS disallowing refunds.

After incomes in the six figures for 2010, 2011, and 2012, taxpayer ran into problems for a couple years, as creditors began to act on his overextended debt.  In 2014 there was a net operating loss, and in 2015 his income was restored when he went out of business and went to work as an employee, again making in the six figures.

My question:  Can the 2014 loss roll into 2015?  At the time, the loss could roll "back" into 2012 and 2013.  His 2014 return has not yet been filed.

Since the IRS can disallow a refund on a return that old, can they disallow the entire return?  If so, they can disallow the NOL entirely.

Thanks in advance - Edsel

 

 

[jklcpa]

2 hours ago, Edsel said:

My question:  Can the 2014 loss roll into 2015?  At the time, the loss could roll "back" into 2012 and 2013.  His 2014 return has not yet been filed.

Since the IRS can disallow a refund on a return that old, can they disallow the entire return?  If so, they can disallow the NOL entirely.

NOLs must be carried back first unless the taxpayer elects to waive the carryback, and that election is made on the original, timely filed return including extension.  At this point, your client can NOT make this election and must carry back first before attempting to carry anything forward.  Would there be any loss remaining after carrying back?

[Edsel]

I understand from your response that the IRS will allow the loss but only if it is carried back.  Used to be 3 years, but I believe for 2014 the only option was for 2 years.

NOL is not large enough for there to be any remaining after rolling back to 2012.

Furthermore, this was a SMLLC filing as a proprietorship, so the tax reduction in 2012 will apply to income tax only, and not to self-employment tax.

Thanks for your response.