2018 and 2019 Net Operating Losses - How to Handle?

[Chester205]

I have Net Operating Losses in 2018 and 2019. Prior to the CARES act, I was unable to carry back my 2018 loss, so it was carried forward to 2019 and is reflected in my return. I attempted to file a Form 1045, Application for Tentative Refund, to carry back my NOL from 2019 (that included 2018) back to the 2017 tax year where I had positive AGI. The IRS has sent a letter back revising my Form 1045 to reduce the NOL to only reflect the 2019 loss. And normally that would make sense, but it got carried forward because the tax law changed in 2019 (disallowing carrybacks prior to the CARES act) .

Do you have a suggestion as to how I should handle this? Maybe refile the 1045 to request a refund of 2017, using only the 2019 loss then file a 1040X for 2017 to carryback only the 2018 loss? Should i do that in a certain order?

Would it be better to just file the 1040X for 2017?  But if so, could I carryback both years' NOL (2018 and 2019) in one amended return?   Or would I be required to first file the amended 2017 carrying back the 2018 loss first, let that get processed, then amend 2017 again to carryback 2019?

Thanks for reading!

[mellish7777]

You might be too late for 2018.

www.irs.gov/pub/irs-drop/rp-20-24.pdf

Generally, a taxpayer must file Form 1139 or Form 1045 within 12 months of the close of the taxable year in which an NOL arises to apply for a tentative refund based on the NOL carryback.

[Chester205]

But wouldn't this indicate I could carryback 2018 losses?

Section 2303 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), revised the provisions of the Tax Cuts and Jobs Act (TCJA), section 13302, for tax years 2018, 2019, and 2020. Taxpayers can carry back NOLs, including non-farm NOLs, arising from tax years beginning in 2018, 2019, and 2020 for 5 years. See section 172(b)(1)(D)(i).

[Anonymous · Accepted solution]

section IRC 172(b)(1)(D) - NOL carrybacks as modified by the CARES act. this is the latest law.

Special rule for losses arising in 2018, 2019, and 2020
(i)In general

In the case of any net operating loss arising in a taxable year beginning after December 31, 2017, and before January 1, 2021—
(I)such loss shall be a net operating loss carryback to each of the 5 taxable years preceding the taxable year of such loss

When To File
Generally, you must file Form 1045 within 1 year after the end of the year in which an NOL, unused credit, net
section 1256 contracts loss, or claim of right adjustment arose. however, this just bars the filing of form 1045 for 2018 (under CARES Act was due by 6/30/2020). there is still form 1040x that can be used to carryback 2018 NOL but one must be prepared for each carryback year. so the 2018 NOL can be carried back to 2013 and then forward.

a 1045 can still be filed for the 2019 NOL - must file by 12/31/2020.  however, the 2019 NOL c/b which would be carried back to 2014 can only be used to the extent that the 2018 NOL c/b doesn't eliminate all taxable income in years in which the 2019 NOL could be carried.

because multiyear NOL's can be complicated, I strongly suggest the use of a pro. 

here's a link for a fuller explanation.

http://news.cchgroup.com/2020/05/20/5-year-nol-carryback-procedures-under-the-cares-act/news/federal...

[Chester205]

Thank you!!

[cherylcanipe]

Can I deduct and carry over from 2017 return losses from my business?  

[Mike9241]

we have no way of knowing. just because you report a business loss on your 1040 does not mean you have an NOL to carry forward or back.  even if you have an NOL, if you did not make the election to forgo the NOL carryback period on a timely filed  2017 return, the NOL would first have to be carried back to 2015 then any remaining to 2016 and then any remaining to 2018 and so forth.  also if you did not make the election to carry forward, the ability to file carryback claims for 2015 and 2016 and any NOL that would have been absorbed in those years are lost. if you did not timely file 2017, any NOL for that year is lost both as a carryback and carryforward.

to determine if you even had an NOL in 2017 use for 1045 schedule A.