Can a NOL be carried back to a closed tax year if it occurs in an open tax year?

[BLM-in-TX]

I am amending my 2016 return and now have a Net Operating Loss of almost $15,000 from a new business I started after being laid off from my job. I would like to carry back that loss because I had substantial income while employed and it may take a couple of years for my new business to show a profit. So the refund would be helpful. It is my understanding that when you carryback a NOL it has to go back 2 years first and then be carried forward if any loss remains. However, it is 2018 now and tomorrow will be the cutoff time for statute of limitations for 2015, and 2014 is already closed. I believe this is a somewhat complicated computation and would like to hire someone to help me with it to make sure all is input and calculated correctly. 

So, my question is, will it be possible to carryback the loss to 2014 and 2015 even though they are 'closed' tax years if the loss is discovered while amending an open tax year, ie: 2016? If so, then I have time to make sure the calculations are correct by finding help. If not, then I will attempt it myself and only go back to 2015 and then forward.

Please help me with instructions if that is the course I am left with. For example, Do I just amend 2015 with a 1040X? 

I have been searching for hours for a question similar to mine, all over the internet and can not find any answers and now feeling a lot of panic.

Your help is much appreciated.

[DanielV01 · Accepted solution]

Since the NOL is for 2016, you follow 2016 rules for the NOL.  It may be carried back, and even though 2014 and 2015 are "closed" years, they are re-opened for a claim of an NOL.  

A Net Operating Loss is a very complicated subject, to be sure, and obtaining a professional is not a bad idea, especially since after tomorrow TurboTax 2015 will no longer be available (and 2014 already is not available).

[BLM-in-TX]

Awesome! Thank you for your help and quick response. One more question...The accountant I used to help setup my company records said he is not a 'Tax Professional' and would not be comfortable helping me with these calculations. I also have extensive casualty losses from Hurricane Harvey and the 2016 Tax Day Flood in Texas, which is what prompted the amendments in the first place.
I thought that that's what accountants actually do, complete income tax reports. So, my question is, what type of professional do i look for to help with these complicated tax issues? Is it an accountant who advertises they specialize in income tax? Or a tax attorney?
I know you probably can not personally recommend a company or service, but perhaps you could give me some guidance or search terms to google? I have spoken to several individuals who haven't struck me as very knowledgeable and not sure who to trust. The IRS is not an entity with whom I want to chance submitting inaccurate reports to. At the same time, I would like to make sure I am able to get back as much money as I am truly entitled to.
Thanks again for your help.

[DanielV01]

That depends.  Not even all experienced tax professionals take on NOLs.  You are likely to find success in finding a qualified preparer for your situation with an Enrolled Agent or a CPA (not a general accountant).  Tax attorneys are well versed in tax law, but not all prepare returns.  You'll want to find someone who specializes working with NOLs.  They are not easy.

[Jeff1117]

Hi Daniel V01: Do you happen to have a code section supporting your answer? I'd like to have some backup for my records.

thank you!!

[DanielV01]

@Jeff1117  The provisions for NOLs are covered in U.S. Code Section 172(b)(2).  Please see this website for more details on all of the NOL provisions:  https://www.law.cornell.edu/uscode/text/26/172.

Note:  The CARES Act has further redefined NOL carry-backs.  Whereas NOL carrybacks were discontinued for tax years beginning after December 31, 2017 by the TCJA of 2018, the CARES Act re-opened the provision, allowing a 2018 NOL to be carried back all the way to 2013.  This Forbes article discusses this in greater detail:  https://www.forbes.com/sites/anthonynitti/2020/04/13/reversed-elections-amended-returns-and-nol-carr...

Please note:  This is tax advice and not legal advice.  For legal advice, you would need to consult an attorney.