NOL accumulated from previous years
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I am putting a client in Lacerte who had an NOL in previous years; the NOL is not from any specific year because it was slowly accumulating from the last number of years. Lacerte is asking me to put the year of loss. What year shall I put in?
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Helpful Answer
"It looks like neither proseries or lacerte has a worksheet to track multiple year NOL carryforwards"
You're wrong there, at least about Lacerte. Click "Add" at the bottom left of Screen 15 to add another year.
"I don't have the information needed to produce a complete and accurate return" is not a problem that software can solve. And you don't have the information you need, because a prior preparer did the return wrong.
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I use ProSeries rather than Lacerte, so I can't help you with that part of your question. But I have a couple of my own....
Every NOL is from a specific years or years. Since the NOL carryover period is limited to 20 years from the loss year, the return must disclose which years' NOL's are being deducted. What was shown in prior years returns?
What has this person been living on, if they have NOL's every year?
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Would 1045, Sch B help? Probably not, since you don't have it for prior years. Heck, I'd just enter 2007 and figure, "Come and get me, coppers."
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You might look at Line 21 of the previous year as a statent is required explaining how the carry over was computed.
Page 10 of Pub 536 is very clear.
"Deducting a Carryforward
If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the Other income line of Form1040 or Form 1040NR (line 21 for 2008).
Estates and trusts include an NOL deduction on Form 1041 with other deductions not subject to 2% limit (line 15a for 2008).
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 NOLdeduction. If you deduct more than one NOL in the same year, your statement must cover each of them."
Perhaps your client can contact the previous tax preparer with this information and tell the preparer you need the information for the 2008 tax return.
Solved!
"It looks like neither proseries or lacerte has a worksheet to track multiple year NOL carryforwards"
You're wrong there, at least about Lacerte. Click "Add" at the bottom left of Screen 15 to add another year.
"I don't have the information needed to produce a complete and accurate return" is not a problem that software can solve. And you don't have the information you need, because a prior preparer did the return wrong.
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Phoebe is correct, Nadre, that you don't have the info to do an accurate return because that info seems to be unavailable from past returns you've seen. If you see how much more of an NOL the client is accumulating in just 2008 alone, however, you might extrapolate that roughly that much occurred every year for the past umpteen years, and you can fill in the worksheet area of Lacerte back to 1988 or whenever, if necessary, with your educated guesses.
If the amount thru 2007, for example, is $20K, and the amount on 2008 alone, ignoring old carryovers of NOL, seems to be $1500, you might assume it's been $1500 a year for the last 13 or 14 years, and put figures into 1993 and on, roughly $1500 each year, except a larger number if necessary in 1993 itself. This would give the client the total $20K, but in such a way that the earliest, largest amount would disappear first and not give IRS anything to "kick" about.
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I like Amy's answer better than my stick-your-finger-in-their-eye approach.
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Putting in wrong information about Prior Year NOLs is just asking for problems with the IRS. The IRS does have access to prior year information, and if they find you are using bad NOL figures for any year, expect long delays and problems in their accepting any NOL deductions.
If the client has any prior returns, you should be able to get accurate NOL figures for each of those years, by just looking at the tax return.
Do not use guess figures or inaccurate figures for the NOLs.
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Right, I guess you can get a POA from your client and go back many, many years (several POA's if need be, although I understand it's possible to put on one line of one POA something like "Years 1983-2007" and it may work).
Then you can access the returns (or transcripts thereof) for which you have POA. I do not know if IRS gives out the records of 20 years ago, but if you explain that you need it for proper NOL calculations, perhaps it's possible.
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If they are living on SSI, what is the expense or loss that continues to generate NOL every year?
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The thought, "Hobby Loss," crossed my mind too.
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Could the "annual" loss simply be the remaining carryforward of an old NOL?
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Original question said the NOL "slowly accumulat[ed over] the last number of years." That's the part that sounds like hobby losses.
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Thanks for your comments.
The explanation statement on prior year returns simply says NOL carryforward from multiple years.
It looks like neither proseries or lacerte has a worksheet to track multiple year NOL carryforwards, so apparently we are expected to track that separately if necessary. I still do not know what year to put in lacerte, because a specific year is mandatory in lacerte. In my client's case it doesn't matter anyway because he will never use up the NOL in his lifetime.
This person is living on Social Security.