Does TurboTax apply the 80% income limit on a NOL

[phil106]

From a previous thread I understand that TurboTax does not calculate my 2018 NOL carry forward  for my 2019 return and I will need to do that using the worksheet from the IRS and then TurboTax will allow me to enter the NOL.  However, does Turbotax know to apply the 80% income limit for the NOL deduction which was part of the tax law act in 2018.  As an example, if my NOL carry forward is $150,000 and that is what I enter into TurboTax but my income is $100,000, TurboTax can only use $80,000 (80% of my income) as a deduction.

[tagteam]

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@phil106 wrote:

....does Turbotax know to apply the 80% income limit for the NOL deduction which was part of the tax law act in 2018.....

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As of yet, it does not, but then neither does Intuit's professional software at this point (particularly, ProSeries).

See https://proconnect.intuit.com/community/proseries-discussions/discussion/re-80-nol-rules-on-1040/01/...

Hopefully, Intuit will address this issue in the next month or so.

[phil106]

As an update just was wondering if this issue has been addressed in the most recent version of Turbo Tax

[tagteam]

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@phil106 wrote:

As an update just was wondering if this issue has been addressed in the most recent version of Turbo Tax

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It certainly does not appear as if this issue has been addressed.

Moreover, I do not believe it has been addressed in Intuit's professional software at this point, either.

I would further not be at all surprised if it were left to the user to make the calculation manually.

[phil106]

Thanks for your answer.  I assume since TT does nothing to support the NOL carryforward (other than letting you enter it), it would be best not to file electronically so that you can attach the IRS Worksheet to show how the NOL was determined.

[tagteam]

The worksheet itself, but do not include Form 1045 with your return per the instructions.

See https://www.irs.gov/instructions/i1045#idm140680692017120

[phil106]

Thanks for the prompt response but a little bit confused so let me try to make sure I understand.

1. I was never intending to file a Form 1045 since that appeared to be only necessary to support NOL carryback which is not doable with the new tax rules and I am only carrying forward excess NOL from 2018 which was the first year my NOL occurred.

2. The Worksheet I filled out was Worksheet 1 from IRS Pub 536

3. I will want to send the Worksheet with my tax return to show how I computed the carry forward.  In order to do that I will need to file my taxes manually

[fbgoldwing]

(3. I will want to send the Worksheet with my tax return to show how I computed the carry forward.  In order to do that I will need to file my taxes manually.)

If you completed the worksheet on the computer, you can copy and paste it into one of the fields on the Explanation Statement form. You will need to format it for readability by cursoring down line by line and move the amounts to the side with a dotted line so that it does not look all jumbled. You probably won't get it exact, but it will be readable.

 EXAMPLE:

"STATEMENT 1
FORM 1040, SCHEDULE 1, LINE 21
2007 NOL UTILIZATION "
INITIAL LOSS                    ...............................   41,896
NOL CARRYOVER AVAILABLE IN 2018 ................................   41,896
MODIFED TAXABLE INCOME (FROM LINE 9 BELOW) ..................   37,317
NOL ABSORBED THIS YEAR          .................................  37,317
TAXABLE INCOME AFTER NOL DEDUCTION ................................   0
NOL CARRYOVER TO 2019          .................................   4,579
"WORKSHEET FOR NOL CARRYOVER
COMPUTED FOR FIRST NOL THAT REDUCES TAXABLE INCOME BELOW ZERO PER IRS PUBLICATION 536,
SCHEDULE B "

NOL YEAR: 2007
USE YOUR 2018 FORM 1040 OR FORM 1040NR TO COMPLETE THIS WORKSHEET
1. NOL DEDUCTION FOR THE NOL YEAR ENTERED ABOVE ...............    41,896
2. TAXABLE INCOME BEFORE NOL DEDUCTION FOR 2006 AND LATER YEARS..     7,717
3. NET CAPITAL LOSS DEDUCTION, 1040 SCHEDULE 1, Line 13 ..........  3,000

[VictoriaD75]

To add to the previous post, the use of an NOL generated after December 31, 2017 is limited to 80 percent of the current year's taxable income. NOLs generated prior to January 1, 2018 continue to be used 100 percent, necessitating tracking of different NOL periods. The previous 2 year carryback and 20 year forward rules continue to apply to NOLs generated prior to January 1, 2018.