2020 NOL and 2019 NOL - Rev. Proc. 2020-24

Question

I have a new client (Individual, 1040-NR) who has an NOL originating in 2018 that was carried forward to their 2019 return (and used in 2019) the remainder is a carry forward to 2020.

2020 has a loss, so we now have an NOL originating in 2020 plus the remainder of the 2018 NOL that could not be used in 2019.

This client is going to be shutting down their US business and probably will not file a return after tax year 2021.

I think the last time the client had any income besides the minimal amount in 2019 was in 2014 (would have to request returns prior to 2018 to confirm) - so I don't see any benefit to using the carry back or the carry forward for that matter since the business is shutting down.

Is there anything I need to do besides checking the box to waive the carry back? Do I even really have to check that box? It looks like nothing like that was done for the 2018 NOL that was used in 2019.

This seems like kind of a huge pain for something we can't even benefit from....

TaxGuyBill · Accepted Answer

Well this changes things. If it was just amending one return then it would be worth it. Thank you for pointing that out.

I had meant to say that the 2018 NOL carry back goes to 2013 and can be completely used in 2013. - So as you pointed out this one would require an amendment since the NOL is from 2018 and the time limit has passed to use 1045.

The 2020 NOL carry back would go back to 2015 and can be completely used in 2015. So the 1045 for 2015 is related to the 2020 NOL, not the 2018 NOL.

So to summarize, I would have to file an amended 2019 return, amended 2013 return, and then would I be able to file the 2015 1045 with the 2020 return since it is related to the 2020 NOL?

Am I understanding correctly?

After all of this, I am not sure it is worth the difference in tax savings. At least I am learning 🙂

EDIT: I am reaching here but I am guessing it is not allowable for us to carry back the 2020 NOL to 2015 via form 1045 without also carrying back the 2018 NOL? I just want to make sure I have done everything I reasonably can do before saying its not worth the trouble.

Except for your edit, that is correct.

You would amend 2013 to use up the 2018 NOL and amend 2019 to cancel the NOL that was being carried forward (because now it is being used up in 2013). So that only involves amending 2 tax returns. Without knowing your pricing structure, it seems like the $3000-ish tax savings may be larger than the cost to amend 2 tax returns.

You would file 1045 to use your 2020 NOL, and the 1045 is based on the 2015 tax return. You are currently preparing the 2020 return anyways, so the only extra 'time' that is involved here is the time to fill out a 1045.

As far as your "edit", each NOL stands alone. So if you want to "waive the carryback" for one year and not the other, that is allowable.

TaxGuyBill · Answer

@EmsBTW2016 wrote:I think the last time the client had any income besides the minimal amount in 2019 was in 2014 (would have to request returns prior to 2018 to confirm) - so I don't see any benefit to using the carry back or the carry forward for that matter since the business is shutting down.  Was the election made to "waive the carryback" for 2018?  If not, it would be carried back to 2013, which could benefit the taxpayer.And just to confirm ... the taxpayer is a Nonresident Alien, but has had a US sourced business?

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