New NOL under cares act

[ocsurf68]

New cares act under my state of Maryland return. Im not sure how to calculate the fields

[aufderha3]

Turbotax won't help with the calculations.  In fact Turbotax hasn't been updated with the cares act info you (4/1/2021).  They still reference the obsolete TCJA.

The IRS has info on how to calculate your NOL here: https://www.irs.gov/publications/p536

Ultimately everyone recommends going to a tax accountant.  If you can find one that wants to take on a new client and deal with NOL (I've tried 3 so far with zero luck).

[DawnC]

You can enter a net operating loss in TurboTax, however, as mentioned above TurboTax does not support the calculation.   In the federal section, search for NOL and use the link to be taken to where it is entered.   

The CARES Act made three changes to NOLs that improves cash flow for struggling businesses:

• Provided a five-year carryback for losses earned in 2018, 2019, or 2020, which allows firms to modify tax returns up to five years prior to offset taxable income from those tax years.
• Suspended the NOL limit of 80 percent of taxable income. This means that firms may deduct their NOLs to eliminate all of their taxable income in a given year, instead of having to carry forward any NOL beyond 80 percent of taxable income.
• Pass-through business owners may use NOLs to offset their non-business income above the previous limit of $250,000 (single) or $500,000 (married filing jointly) for 2018, 2019, and 2020.

If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL).   Publication 536 covers NOLs for individuals, estates, and trusts:

• How to figure an NOL.
• When to use an NOL.
• How to claim an NOL deduction.
• How to figure an NOL carryover.

Specifics to the state of Maryland

Maryland conforms to this provision as it applies to tax years 2018 and 2019. NOLs incurred in tax years 2018 and 2019 may be carried back for up to five years. If a taxpayer incurred a federal NOL in the tax year 2018 or 2019, and they amend prior year federal returns to carry the NOL back, they may also amend their Maryland returns for each year a federal amended return was filed.

Please note, the IRS has implemented procedures for quick refunds due to the carryback of NOLs, but Maryland has no such procedures; taxpayers must file amended returns to claim the state refund.   For more details on this, please click on this link.  #3   

[aufderha3]

@DawnC  Careful.  Once you say you've had an NOL in Turbotax 2020 it generates an election page waiving your carryback rights the CARES act gave us.  It references TCJA and doesn't tell you that it's done this either.  Intuit needs to fix this imho.  

[mahimahimom]

Hi Dawn:

Waiving the carryback under the Cares act,
is exactly what I want to do for TY 2020.  

But how to WAIVE CARRYBACK in TurboTax?  (I have the downloaded version TY 2020 Home & Business.)

2020 is the year in which I opened my short-term rental, with an ocean front beach condo, for biz.

In 2019, I incurred many expenses
(fixing and repairing the whole place, getting tons of sheets, blankets, and many supplies of all sorts)
and 1 capital expense (purchase of the business asset: real property, namely the beach condo itself).

2020, same month I was open:  Beaches closed. 
The wall-less beach tiki huts, bars and restaurants at our beach,
got cordoned off with yellow tape as if they were crime scenes.

The always buzzing with tourists building, turned into somewhat of a ghost building.  Eerily empty!

Tax wise:  2020:  A large, abnormal NOL to be carried forward.

Plus side:
TY 2021 was wayyyyyyy better:  cabin-fevered tourists were flocking down here and partying it up!

A stark contrast to 2020.  

I dipped deep into savings though, just to stay standing in 2020. 

And:  I am still standing 🙂  

It seems crucial that I do my taxes and do them right in my first year of opening up for biz: 2020.

That is why I am so perfectionistic about this TY 2020 return.

And every time, I think I am ready, I realize there's a caveat that I am not sure of ...
And I wait longer, reading, reading.

 I am worried to set myself on the wrong path in my crucial first year of 2020 of doing business.

Then: getting stuck with complications in TY 2021 and errors later on.

BIG Q:  HOW DO I CARRY MY NOL FOR TY 2020 FORWARD - NOT: BACKWARD?

WHERE IN TURBOTAX DO I ELECT THAT?

Someone in these messages stated it is done for you in TT.  Well, that would be great. 

But on what page in TT do I check the "show form" button to see if that election to carry forward is indeed made?

PS: I am late filing past my extension, I know. 

I kept meticulous receipts and filing system and

was looking forward to put all my record-keeping for my biz at work finally ...

I hope I am not too late for my choice of NOL carry forward.

And specifically waiving the NOL carry back.  

I am not even sure if TurboTax has the Cares act aspect of NOL carry back 5 years built in or not.

[mahimahimom]

Ah.  This is exactly what I am looking for.

Which page?

I want to elect going carry forward.  

I do NOT want to carry back.

I want to be sure of that I do not carry back.  

Where do I check?  

What page in Turbo Tax? 

What form?

[M-MTax]

Waiving the carryback under the Cares act, is exactly what I want to do for TY 2020.  

Too late! You had to attach a statement to your original return filed by the due date (including extensions) for the NOL year and that was 2020 for you AND you missed the due date and extension.

[mahimahimom]

So I had to file a statement with the 2020TY return to make sure that my NOL of 2020 carries forward into 2021?

What if I have no or too little income in the 5 y prior to 2020 to absorb the 2020NOL?

Will it automatically bounce forward into 2021?

What happens to it?

[mahimahimom]

I am getting REALLY worried now.

That the CARES act is doing damage here.

Namely so:

Had I not had to waive this new CARES act option to carry NOLs back, which did not exist before,

then:

then the NOLs would naturally carry forward - is that right?

(And, carry forward, whether the return for TY in which the NOLs arise,

was filed timely - or not?)

[M-MTax]

What if I have no or too little income in the 5 y prior to 2020 to absorb the 2020NOL?

Will it automatically bounce forward into 2021?

You carry it back to the first tax year.....5 yr prior.....and any unused part of the loss gets carried to the next tax year and then the next and so on. It doesn't bounce from 5 yrs back to 2021.

[mahimahimom]

So if I understand correctly:

Now (now being December 2021) for TY 2020 return,

and filing late (past Oct 15, 2021 deadline):

I MUST file the Forms 1045 for 5 TYs pre-TY 2020:

2015, 2016, 2017, 2018, 2019 Forms 1045 with TY 2020 return?

Because I can not opt out of the 5 year carry back NOL from TY 2020/Covid year?

[mahimahimom]

"What if I have no or too little income in the 5 y prior to 2020 to absorb the 2020NOL?

Will it automatically bounce forward into 2021?

You carry it back to the first tax year.....5 yr prior.....and any unused part of the loss gets carried to the next tax year and then the next and so on. It doesn't bounce from 5 yrs back to 2021."

That part I understood.  That it goes consecutively applying to the farthest y back.

I understood it's not a cherry picking thing for years.

What happens though if one does nothing?

Like if one does not elect to waive carry back?

Like if one also does not attach the 1045s for the 5-y Cares Act carry back?

Like files nor 1045s,

nor amended tax returns for the 5 y previous
(for which amendments there is 2 years longer time than deadline Dec 31, 2021 for Forms 1045). 

I can still make it timely for the 1045s to attach to my TY 2020 return because it is not yet Dec 31, 2021.  

But let's say I don't attach the 1045s.

What actually happens next year if I enter my NOL forward in TY 2021?

As I intended to keep it all simple and less mind-boggling.

Plus I can use the 2020 NOL for 2021 because there was a bounce back in biz in 2021.

[Mike9241]

What happens though if one does nothing?

Like if one does not elect to waive carry back?

A statement waiving the NOL carryback period MUST be included in a timely filed return for the year of the NOL. if you did not include the statement (TURBOTAX does provide it if you select it) then you must do the carryback.

a statement something like the following was needed.

“Taxpayer is electing to apply Sec. 172(b)(3) under Rev. Proc. 2020-24 and tax year for which statement applies”

IRS 1045 Instructions:

Where To File: File Form 1045 with the Internal Revenue Service Center for the place where you live as shown in the instructions for your 2020 income tax return. Don't include Form 1045 in the same envelope as your 2020 income tax return. 

What actually happens next year if I enter my NOL forward in TY 2021?

no one can say for sure that the IRS will catch the failure to timely file the carryforward election.  if they do besides the taxes you will owe penalties (maybe even substantial underpayment penalties) and interest. it might take the IRS a year or two to catch your "error". under certain circumstances, it may have 6 years or longer. Then certain carryback years will be closed. the loss will still have to be carried back to 2015 and then carried forward but you will lose out on refunds for the closed years.

[mahimahimom]

You wrote:

"no one can say for sure that the IRS will catch the failure to timely file the carryforward election"

Now you see? 

That is actually where startups in TY year 2020 / Covid year get messed up by this CARES act!

When this CARES act is supposed to help.

"carryforward election"?  

That's a misnomer!

It's a "waive carryback election".

"Waive carryback" naturally results in a NOL carryfoward.

Pre CARES act, it was only carryforward.

This is all wrong!   The new CARES act TY 2020 should have been:

Carryforward UNLESS you want and check Carryback.

That's a big difference.

Big difference.

And do it like that is more in the spirit of how it was and what tax payers expect to have to do. 

And it would not have messed up existing programs and forms people might have already had.

The turbo tax program for TY2020 that I had started before Oct 15, 2021
seemed to not even have that CARES act "carryback waive" option built in like that.

I did not come across that "carryback waive" option once.  

I still don't see it.

No popup screens that asked me about waiving anything.

because ... BEFORE CARES act ... there WAS ONLY carryforward.

And the TurboTax TY 2020 was likely made before all these CARES act provisions kicked in?

In TurboTax I saw no specific questions about carry forward in TurboTax TY 2020,

nor about carry backward, 

as I was populating all the necessary fields in TurboTax Home and Business earlier on.

I only discovered about "5-y carryback waiving" online

as I read additional info on the IRS site and elsewhere

anxious to do everything perfectly in my very first business tax year for my new business,

and seeking more info than what the TurboTax provides.

and now ... now one apparently has to ELECT it by October 15, 2021 .... NOT to have carrybacks

This makes life harder for 2020 small biz startup owners like myself

who have been scrambling, and happily welcomed extra business in TY 2021.

It feels like a triple punishment, rather than help, this CARES act.

Punishment number 1 being the COVID year. 

Punishment 2

I started working on the 2020 TY timely ... already in July 2021 or so ... to file TY 2020 by October 15, 2021,

within the extension deadline. 

Clueless that apparently there was a "waive carryback deadline" ticking.  Tick, tick - no idea!

Then:  stuff happened, let's call it 'life'.  

I had to interrupt my filling TY 2020 in October in the convenient TurboTax forms.

Had to, even though I was much enjoying filling everything out and calculating and making a gazillion Excel sheets. 

Weirdly to some perhaps: I was having fun of sorts.   And learning a lot.  

I assumed there would be no harm in interrupting filling out my TY 2020 return and filing past Oct 2021:

After all; I had nothing but BIG unanticipated losses for TY 2020,

and could not possibly owe the IRS anything....

And, I assumed anyway that these losses would naturally go forward into TY return 2021.

No matter when I file them.

Punishment 2

Losses do not carry naturally forward.  

Now I might  in time incur penalties if I do not file the Form 1045?

(Which of course I will-file the 1045)

But the whole "MUST fill out the 1045" after October 15, 2021 is not right, an extra punishment of sorts.

I am guaranteed not the only startup person in 2020,

learning the new biz every which way and who is tax-wise a newbie too,

who gets hit with this.  

That's not counting punishment nr 3: 

no help or loans or anything for startups who had already poured $1000s in their new business
which was to open full flung in 2020, and was shut down before it began.

No help because  for the government support, a business owner has to show "prior income" which of course is:

  not there, because with a 2020 startup there is no prior income to show.  

It think this CARES act is more of a night mare than a help for TY 2020 startups

that were well underway when Covid hit in March 2020.  

As a new business owner, the newness of business itself is challenging enough;

to wrap your head around the taxes; also challenging enough. 

Then, if you are still standing after year 2020, having survived a major blow of shutdowns,

having carried your business from your own savings for months at an end,

in the hope that eventually, eventually this just had to all blow over  ...

and then it does .... and you are still standing, and you are having a good year 2021

not even having made up for the losses though - but at least making income ...

So hooray, hooray ... we made it!

THEN:  tax man comes and slaps you with complex CARES act rules and regs that punish you if you don't meet them in your first year of doing business, and which act only seems here to help existing businesses?

So for startups:  no aid, no relief, more economic INsecurity.

Wrong, wrong, wrong!

I am mad

[Mike9241]

in search box type NOL election.   

the TCJA eliminated the NOL c/b for years starting in 2018. prior to this it was 2 years and even 3 years earlier on. as far back as the tax laws go the C/B of an NOL was required unless an election to waive the carryback was included with a timely filed return including a timely filed extended return.   The CARES Act superseded the TCJA and allowed a 5 year carryback

Losses do not carry naturally forward.

Now I might in time incur penalties if I do not file the Form 1045?

(Which of course I will-file the 1045)

But the whole "MUST fill out the 1045" after October 15, 2021 is not right, an extra punishment of sorts.

for a 2020 NOL you have until 12/31/2021 to file it (make sure it's postmarked timely)

failure to file the 1045 by the above date does not mean you lose the 2020 NOL. Just that you have to switch to form 1040-X. one for each C/B year. for the 1040-X for a 2020 NOL, you have until 5/17/2024 to file.

the only penalty for not filing in a timely manner is the loss of some or all of the NOL and the tax benefit that it would produce because the statute of limitations will run for the oldest years.  No other penalty. Also, there are no penalties if you decline to claim the NOL.

many taxpayers that start a new business do consult with a tax pro for the first year and let them do the return. they learn from this. many laws besides tax laws that they are subject to are not obvious and failure to abide can lead to nig trouble down the road. also, they get insight into return prep so they can do next year's return. they also learn of other things outside of taxes that may be required of their business or themselves - sales tax registration,  business licenses, insurance.