Is a late filed 2018 NOL still carried back? (TCJA/CARES act)

[waterfisherman]

On April 15, 2022, I mailed my (late) 2018 return that has a NOL.  Of course, it was due on April 15, 2019, and was exactly 3 years late.  I did not make any elections regarding the NOL on the return.  (I think I was too late to even consider any of the NOL elections.)

It appears I am too late to request a refund of prior years using the NOL.  I think those refund requests would have been due also by April 15, 2022.

But, if the NOL is carried back, I wouldn't even be requesting a refund.  I'd be reducing outstanding tax owed.  I don't think the period of asking for a refund within 3 years of the 2018 return due date has any bearing on reducing outstanding tax owed - just asking for refunds.

So, is the NOL carried back? If so, to which year?

NOL carrybacks used to be 2 years, but the TCJA eliminated that, leaving them to only be carried forward.  But, the CARES act has provisions for it temporarily being 5 years. However, the 2021 Pub 536 states: "The special rules in section 172 permitting 5-year carrybacks for 2018, 2019, and 2020 net operating losses (NOLs) added by the... CARES ACT... have expired. Generally, you can only carry NOLs arising in tax years ending after 2020 to a later year."  The easy part is the last sentence -- since my NOL arised in tax year 2018, that sentence doesn't apply.  The first sentence saying the 5 year carryback rules have expired is what I'm not sure about.  Did filing my 2018 return so late mean that I automatically lost the 5 year carryback, and the only choice I now have is to carry it foward?  Or, is this sentence in the 2021 Pub 536 just to highlight that there's no more carrybacks starting with 2021 returns -- and is it not saying that the 5 year period has expired, even if you're late filing a 2018 return?

If my 2018 carryback isn't "expired", then I assume it gets carried back to 2013, and forward until used? There's no way to just carry it back 2 years to 2016, like used to be allowed? (Carrying back to 2016 would be my preference, but I think if there was any way to do that instead of 2013 that it would require an election that I'm too late to file.)

Once I know the answer to this question, I'll ask another about the mechanics of lowering outstanding tax owed.  There's some details on that I'll get into on another post, so we can leave that for later.

[Rick19744]

You have a fairly involved tax situation in which a one on one with a tax professional is the best course of action. I will provide my thoughts on the NOL matter, with your limited facts and brief research:

1. Had your 2018 return been timely filed, there were no elections available for the NOL.  The TCJA eliminated the carryback; so there was only the option of carrying forward any NOL (there were a few exceptions that do not apply here).
2. The CARES Act temporarily reinstated a 5-year carryback for NOLs generated in 2018, 2019 and 2020.  There is no mention of being timely filed.
3. So in general, I believe your 2018 NOL would be subject to the 5-year carryback and the rules stipulate that the NOL must be carried back to the earliest year.
4. Revenue Procedure 2020-24 provides provisions where a taxpayer can waive the carryback provisions under the CARES Act.  There are not sufficient facts to determine if you qualify for this potential waiver of the carryback for your 2018 NOL.
5. Just logistically, you have just paper filed your 2018 tax return.  Based on the fact that the IRS has millions of unprocessed tax returns, who knows when your return will be processed.
6. Now you would be attempting to file amended returns for the 2018 NOL, it is possible that those returns could be processed before the IRS processes your actual 2018 tax return.  This would open up a huge quagmire of a letter writing campaign with the IRS.
7. While I do believe you are eligible for the 5-year carryback of the 2018 NOL, you need to visit with a tax professional, provide this individual with all your facts and determine a best course of action to proceed.

[waterfisherman]

Thank you so much for the limited thoughts you could give, given my limited facts and brief research.

I looked through Revenue Procedure 2020-24, and its section 4.01(1) states: "Elections to waive carryback... for a NOL arising in a taxable year beginning in 2018 or 2019... must be made no later than due the date, including extensions, for filing the taxpayer's Federal income tax return for the first taxable year ending after March 27, 2020."  So, I think I'm ineligible for this.

Regarding the mechanics I skipped in my original post, since I wanted to see which way I'd likely have to go with the carryback...

I haven't filed my 2016 tax return yet.  Some of the 2018 NOL will remain unused by 2013-2015.  I'm about to file my 2016.  On 2016, tax will be owed.  Less tax will be owed with the NOL carryback, but certainly less than would be owed without it.  I'd usually at this point file a 1040X to use the NOL in 2016, but that doesn't seem to make sense since my 2016 isn't filed.  I guess I could enclose in the same mailing a 2016 return and a 2016 1040-X, but I'm thinking it makes more sense to just file a 2016 return and use the portion of the NOL carryback remaining and usable on the 2016 Schedule 1 line for "Other Income", where a NOL carryforward would typically go.  I'm thinking along with that, I'd attach a statement describing all facts about the NOL, including how it is calculated, and maybe even attach a copy to that statement of the 2018 return showing the NOL generated -- marking each and every page extremely visibly saying it was already filed separately, is not to be processed as a return, and is attached only as a copy to show how the NOL was generated.

Carrying forward the strong suggestion of meeting with a tax professional, does my idea of just filing a 2016 return with the NOL carryback on Schedule 1 Other Income with a statement seem wrong?

[Critter-3]

RUN  to a qualified local tax pro if you are still filing these old tax years ... this is not a DIY project if you have any hope of getting any use of the NOL in any tax year.  

[Rick19744]

In response to your question "Carrying forward the strong suggestion of meeting with a tax professional, does my idea of just filing a 2016 return with the NOL carryback on Schedule 1 Other Income with a statement seem wrong?"

Since you appear to have several late filed returns, I recommend you discuss the mechanics of how best to file everything with a tax professional.