NOL Carryforwards and Carrybacks of owned business (S corp, LLC, 2020)

[UCcpg]

If I have an NOL in my S Corp or LLC do I manage carryback and carryforward losses on my business books before it is passed to my personal return, or do I pass the entire loss to my personal taxes and apply carrybacks and carryforwards there?

[Critter-3 · Accepted solution]

An S-Corp is a pass thru entity ONLY  and as such  it CANNOT have a NOL of it's own.  

[Mike9241]

if a state taxes the S-corp at the S-corp level it may allow you to carry back the loss or it may only allow a carryforward or deny any c/b or c/f.   at the individual level you report the loss on your return then if you have an NOl (you may not even if a business has an NOL)  currently you can make an election to forgo the carryback on a timely filed return. if you don't make the election or fail to timely file the election (due with timely filed return including extensions) it has to be carried back to 2015 (2020 NOL) and then forward.

how can you have a business NOL but no NOL to c/f or c/b

say $10,000 in business losses, $22,400 in non business income, and std deduction of $12,400.   taxable income (line 15) is 0.  your business losses of $10,000 must be reduced by the excess of nonbusiness income ($22,400) over non-business deductions (the std deduction of $12,400)   or a net $10,000. thus your NOL is $0.   put another way. you usually won't have an  NOL if adjusted gross income is positive. 

for more info see form 1045 schedule a and the instructions

   https://www.irs.gov/pub/irs-pdf/f1045.pdf

https://www.irs.gov/pub/irs-pdf/i1045.pdf

[UCcpg]

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@Mike9241 wrote:

how can you have a business NOL but no NOL to c/f or c/b

say $10,000 in business losses, $22,400 in non business income, and std deduction of $12,400.   taxable income (line 15) is 0.  your business losses of $10,000 must be reduced by the excess of nonbusiness income ($22,400) over non-business deductions (the std deduction of $12,400)   or a net $10,000. thus your NOL is $0.   put another way. you usually won't have an  NOL if adjusted gross income is positive. 

But what if you had 10,400 in non-business income? So after business losses, your AGI is 400. Then with deductions you are at -12000.  Would the 10,000 business loss carry back or forward then?

[Mike9241]

i probably should have used the word loss rather than NOL

example: k-1 loss from S-Corp of $10000 and dividend income of $20000. adjusted gross income is a positive $10,000.  by the way wages are business income

so say wages from S-Corp $15000. k-1 loss from S-Corp $10000.  net business income is $5000

[Critter-3]

A S-Corp loss and a NOL  is as different  as an elephant and a bird so it is good to use the correct terminology.

To be able to deduct the loss on the 1040 you need to have enough basis in the company ... hopefully you have been keeping track.   The IRS now requires that you do.  

If you have enough basis then the loss on the 1040 could ultimately produce an NOL on the 1040 which must be dealt with on a timely filed return.