Question

Applying NOL Carryback to Unfiled Return

Forum|Forum|4 years ago
October 5, 2021
2 replies
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Greetings. I'm catching up on prior year returns. I filed an extension and I'm preparing to file my 2017 return. I will have a large NOL that I can carry back to 2015 and 2016. I have not yet filed either of those returns yet but I'm preparing to do so. My question is: Do I have to file 2015 and 2016 and then amend them to claim to NOL Carryback? Or can I file the original returns with the NOL carry back and form 1045 Schedules A & B?

Not A Product Question

M

Mike9241

It would seem that you have lost the ability to file an NOL carryback because the 2017 return was not filed with 3 years of its due date including extensions under IRC 6511(d)

(2)Special period of limitation with respect to net operating loss or capital loss carrybacks
(A)Period of limitation
If the claim for credit or refund relates to an overpayment attributable to a net operating loss carryback or a capital loss carryback, in lieu of the 3-year period of limitation prescribed in subsection (a), the period shall be that period which ends 3 years after the time prescribed by law for filing the return (including extensions thereof) for the taxable year of the net operating loss or net capital loss which results in such carryback, or the period prescribed in subsection (c) in respect of such taxable year, whichever expires later. In the case of such a claim, the amount of the credit or refund may exceed the portion of the tax paid within the period provided in subsection (b)(2) or (c), whichever is applicable, to the extent of the amount of the overpayment attributable to such carryback.

(B)Applicable rules
(i)In general
If the allowance of a credit or refund of an overpayment of tax attributable to a net operating loss carryback or a capital loss carryback is otherwise prevented by the operation of any law or rule of law other than section 7122 (relating to compromises), such credit or refund may be allowed or made, if claim therefor is filed within the period provided in subparagraph (A) of this paragraph.

Critter-3

@Mike9241

Doesn't that mean that refunds on returns that old cannot be received due to the limitations and not that they cannot carry the NOL back at all?

Since the poster must carryback the NOL and use it up before they can carry it forward they should complete the original 2015 return & then the 2016 return using the NOL as allowed ... if there are any refunds on those returns those are forfeited however the NOL must be used and reduced by what could have been taken thus reducing the amount to be carried forward to 2018 or until completely used up.

@radbrad

File the original 2015/2016 returns with the NOL ... do not file an incorrect return then add the NOL on an amended return ... that just makes double the work for the IRS (and you) and increases the chances that a data input operator will make a mistake.

M

Mike9241

the way I read that code section is because 2017 is filed more than 3 years after its due date including any valid extensions (if the taxpayer took out a valid extension for 2017, they have until 10/15/2021 to file it and would be able to file NOL c/b claims) the NOL can't be carried back. since it would seem no valid carryforward election was made there is no carryforward either. There is nothing that prevents the taxpayer from filing 2017 and then carrying back the NOL. the worse that can happen is the IRS rejects the c/b claims. However, say the IRS honors the C/B claims but then realizes that the law doesn't allow it. the taxpayer will get a bill.

R

radbradAuthor

Thanks everyone for taking the time to reply. Rereading my question it may not have been as clear so I'll try to restate the details a bit. I've prepared but not yet filed my 2015, 2016 and 2017 returns. For each year, I filed a timely extension. The results of the original returns in 2015 are zero AGI, no NOL, no tax due, nothing withheld no refund. In 2016, I owe less than $100, had significant income, tax and withholding.

In 2017, I have a large NOL from disposing of a bunch of rental property. The original 2017 return results in a refund of all withholding and a large NOL to carry back and forward. Since the 2017 return was due (with extension) on 10/15/2018 -- adding three years gets me to 10/15/2021. So, I think I'm still good to get the 2017 refund. And, it also looks to me like I can file a claim for refunds due to any carry back to 2015 and 2016 as long as the claims are made by 10/15/2021 -- the date the NOL is generated. Do I understand that correctly?

If that is correct, then the question is process. I realize it's too late to file a form 1045. So, the only option I found was to file an amended return. But, as I already said, I haven't filed the original yet. Hence, my original question was do I file the original and amend it? Or, should I file only one with the carry back applied to it? It seemed like filing the original and the amendment made sense because the amendment with 1045 schedules made clear what is happening. Filing an original only (with the NOL carry back figured into it) might make them think it was barred as late filed rather than understand that the refund claimed was due to an NOL carryback within the time limit for filing for the year the NOL was generated.

I hope this make sense! Thanks for all the replies!

A

Anonymous_

Employee

You will not be getting refunds for 2015 and 2016, @radbrad; those are time barred (SOL).

Regardless, according to your post, you have zero AGI for 2015, no withholding, etc., so it is not relevant.

With respect to 2016, the NOL can be used to reduce any tax you might owe but, most likely, you will need to add penalties for late filing and interest to your tax liability for that year.

O

Opus 17

Employee

@radbrad

Here’s the problem, and why I said to do things in the order that I suggested.

You can’t use form 1045 more than one year after the year that the loss occurred, that means your ability to use form 1045 for the 2016 refund ended December 31, 2018.

Suupose you file your 2015, 2016, and 2017 returns now. You can use the NOL to offset your tax on the 2017 return. Then you have to go back and file amended returns for 2015 and 2016 to carry back the NOL. If you have any loss left over, you can use that on your 2018 return.

You have no income or owe no tax for 2015, so the NOL won’t get used up, but you have to file to get it on paper.

Then, when you file the 2016 amended return, even though the NOL might generate a small refund, it won’t be paid because of the statute of limitations on amended returns, which applies regardless of the reason for the amendment. That means that if you owe tax for 2016, you will pay that tax when you file your return plus penalties and interest that could double the amount you owe. Then when you file the amended return with the NOL, you will get nothing back. However, if you include the NOL on your original 2016 return, it can zero out the tax that you owe, and if you owe no tax when you file a return, there is no penalty, even if the return is five years late.