NOL question

Forum|Forum|3 years ago
April 19, 2023
1 reply
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I just filed my 2022 income taxes and my AGI (on line 11 of form 1040) was -$370,800.

I am assuming that my NOL to be carried forward to 2023 year will be $ 370,800. Is that correct?

This loss was a result of loss in one of my businesses (that loss was -$ 552437) which was offset by salary and other income.

This is the first time in my life that I have this kind of loss. My question is: Should I convert my 403b plan into a Roth IRA in 2023, so that the conversion will boost my taxable income for 2023, but it will be still under NOL of $ 370,800? Secondly, if my taxable income for 2023 before NOL is less than $ 370,800, can I carry forward unused NOL to 2024 and beyond? Thanks in advance.

Not A Product Question

GeorgeM777

A net operating loss can be carried forward indefinitely--they can no longer be carried back--but such losses are limited to 80% of taxable income. Whatever remains after deducting the NOL in 2023, just carries over to the next year and so on until exhausted.

Regarding converting your 403(b) to a Roth IRA, we don't know without a full review of your financial records whether that would be prudent. If the amount converted were contributed pre-tax then upon conversion such funds would represent taxable funds. The withdrawn funds may also be subject to early withdrawal penalties.

@taldrknsom

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taldrknsomAuthor

@GeorgeM777

Thank you for responding.

I guess I need to figure out my actual NOL that will get carried forward to 2023 and beyond. Can you determine how much will my NOL be? I thought it was equal to excess loss over my AGI.

I am 62 years old, and will not be subject to early withdrawal penalty on my 403b conversion. I know all of my 403b conversion will become taxable income when I convert it into my Roth IRA. I am converting it into Roth because my NOL carryforward losses are large enough to cover my extra taxable income from 403b conversion. Plus, I have more freedom as to where to invest in my Roth IRA.

Given the loss numbers I provided in my original post, can you tell me how much will be NOL that I can use in 2023 and beyond? Thanks

GeorgeM777

No, because it's a multi-step process to calculate a net operating loss. IRS Publication 536 and Worksheet 1 on pages 3 and 4 explain the method a taxpayer should use to calculate a NOL. In summary, a NOL calculation starts with your total 2022 income, less your original 2022 total deductions, reduced by the disallowed items, and the resulting number is your NOL for 2022.

Here is a link to IRS Publication 536.

NOLs for Individuals, Estates and Trusts

@taldrknsom

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