NOL Carryover

[MJG CPA]

I have a 2006 NOL being carried back to 2005 which is not totally used in that year. I'm trying to make sure I have a good number for the amount remaining to be carried forward to 2007.

In calculating the carry forward, I brought in the ATX NOL worksheet (the Ln 24-NOL tab) into the 2005 return. It calculates a different number than my manual calculation on sch B of the Form 1045.

The difference is due to the change in taxable social security benefits and amount of medical benefits that are now deductible because of the decreased AGI.

The ATX worksheet is basically saying that these items don't consume part of the NOL but the 1045 ignores these items in determining the amount to be carried over.

If anyone is good at calculating NOL c/o's:

1. Can the ATX worksheet NOT be used for a calculation of NOL usage in a carryback year?

2. Logically, does it make sense that the decrease in taxable soc security benefits and the increase in deductible medical exp. (sch A itemized ded.) would consume part of the NOL?

Appreciate any thoughts!

[Maribeth]

I do not use the ATX NOL worksheet for intervening year calculations. I only use it to calculate the current year NOL and the worksheet itself is very limiting, you have to know your NOLs in order to use that worksheet properly.

As to intervening years, the modifications you make to taxable income apply only to the amount of NOL used up. The social security calculation is NOT one of the modifications you make. The adjustment for medical expenses IS one of the adjustments you make.

For example, your AGI for the carryback year was 20,000 and the standard deduction was used. If there were no additions to modified taxable income (add back capital losses, §1202 exclusion or production deducton), then the amount of NOL that would be used up for the year would be $20,000.

Now you put that on line 21 of the return and your social security gets redetermined. But the amount that was used of the NOL is still $20,000.

It is like regular tax and AMT. Two different calculations going on. You have to split it apart and look at each separately.

I am so sorry that I am not explaining this clearly. If you wish to send me a message with the details, I would be happy to review your calculations for you.

Maribeth

[ed_accountant]

Atx Versions 2005 and 2006 did not calculate the NOL carryforward correctly or the NOL deduction. I have not tested it version 2007 since I avoided using ATX for NOL clients. For my NOL clients I used lacerte pay per return tax software..

You will need to review the forms and calculate it manually.

[MJG CPA]

If you wish to send me a message with the details, I would be happy to review your calculations for you.

Maribeth

I have just sent you the information. Thanks for your offer. :rolleyes:

[michaelmars]

I go by the theory that if i can't figure it out and the atx programmers can't figure it out, then the irs auditors can't figure it out either. Hand them a work sheet and 9 out of 10 times they say fine if the numbers are close. on that dreadful 10th time, just blame it on the computer!

[MJG CPA]

I go by the theory that if i can't figure it out and the atx programmers can't figure it out, then the irs auditors can't figure it out either. Hand them a work sheet and 9 out of 10 times they say fine if the numbers are close. on that dreadful 10th time, just blame it on the computer!

Well, I happened to get #10. I submitted the ATX NOL carryover worksheet (which was different by about $11,000-the change in taxable SS benefits and change in deductible medical) and IRS has rejected it saying it needs to be calculated using sch B of Form 1045.

So that's what I am doing. :(

[kcjenkins]

I think that is where you made your mistake. You START with the NOL worksheet, but then you use the 1045 tab 3 and tab 3 to do the calculations. This is not automatic, you have to make entries on those worksheets to get it right.