Accounting News and Notes

Award Winning CPA Serving Roswell, Johns Creek and Roswell Advises on How Using Net Operating Losses can Save Thousands

How Using the Services of a CPA can Get You Refunds You Never Expected

Tax Law  has allowed for decades the Net Operating Losses (NOL) of  both individual and corporate taxpayers to utilize losses to legally shelter the otherwise taxable profits of other tax years. This allows taxpayers to receive a tax benefit, and perhaps a refund, on taxable income, which would otherwise would be due. The loss itself is created in a tax year where you allowed deductions are more than your income for the year, thereby potentially creating a  NOL, what can be used to either carry-forward or carry-back. You are able to gain benefit from your NOL from deducting it from your income in another year or years.

Generally NOL losses are generated most often from deductions from a trade or business. Generally speaking a Partnership, LLC, LLP, or S Corporation cannot use an NOL as partners/members/shareholders will receive a K-1 for their respective portion of a loss. There on an owners individual return shareholders will report their proportionate earnings and will determine their eligibility for a NOL on their personal income return/IRS Form 1040.

There are some items are not eligible to be included in the NOL determination. The most common items not allowed to be considered are for any deduction for personal exemptions, capital losses in excess of capital gains, and non-business deductions in excess of non-business income. Non-business deductions, for example that would not be allowed to be considered for calculation purposes include alimony paid or deductions to an IRA or a self-employed retirement plan.

Generally speaking NOL’s for the 2008 tax year must be carry-back the NOL to the two prior tax years (oldest first) and then forward any remaining NOL for twenty years. If you have revenues of less than $5 million for the last three years, then you can elect, if you qualify, for a 3, 4 or 5-year carry-back period. Farming losses can be carried back for five years.

You can chose not to carry-back your NOL by attaching to a NOL tax loss year (for a tax return that was timely filed, including extension) a statement that you chose to forgo the carry-back period under IRS Code Section 172(b)(3). Please be advised that once you make this election that it is irrevocable. You must make the election for all NOL tax years for which you so elect. A timely filed IRS Form 1045 can be used to reflect NOL losses to claim a quick refund or you can use IRS Form 1040X.

It is widely encouraged that all tax elections and tax return preparation be done only by an well-experienced CPA. Tax Law surrounding the Use of Net Operating Losses (NOL’s) for Individuals, Estates and Trusts is covered in IRS Publication 536 can be viewed at the IRS web-site at http://www.irs.gov/pub/irs-pdf/p536.pdf

To read more about John Dillard CPA and his CPA practice, business consulting and IRS representation visit http://www.hiscpa.com/

To read about his books A Voice of One, Overcoming Life’s 9/11’s and Charleston Dawn and his speaking ministry visit http://www.john-dillard.com/

Serving Barrow, Bartow, Carroll, Cherokee, Clayton, Coweta,  Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Walton, Barrow, Bartow, Carroll, Henry, Newton, Bartow, Walton, Rockdale, Barrow, Spalding, Coweta, Dawson, Douglas, Fayette, Newton, Paulding, Spalding, Walton, Henry, Paulding, Douglas, Coweta, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder, Woodstock,  Smyrna, Sandy Springs, Marietta, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Lake Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond

Atlanta CPA on Helping Georgia Taxpayes Understand & Utilize Net Operating Loss Carry-backs and Net Operating Loss Carry-Forwards

Tax law has long allowed individual taxpayers to carry back and to carry forward tax losses to offset reportable income in other years. Thus if a taxpayer has a business loss that is reflected on a return they can carry these losses either back for forwards thereby legally sheltering income and creating refunds that would otherwise not exist. Net Operating Losses (NOL) are opportunities for taxpayers who have paid taxes in one year to legally offset these monies against NOL’s. Generally speaking a NOL is defined as the extent that allowable expense exceed deferred income and are carried back, by the taxpayer, two years or carried forward twenty years.

Claiming & Deducting a NOL Carryback

If you are individual taxpayer you can carry back your NOL, by using either Form 1045 or Form 1040X to claim your refund. You will get your refund faster by using Form 1045, but you have a shorter time to file it. You can use Form 1045 to apply an NOL to all carryback years. If you use Form 1040X, you must use a separate Form 1040X for each carryback year to which you apply the NOL.

Generally, you must file Form 1045 on or after the date you file your tax return for the NOL year, but not later than one year after the end of the NOL year. For example, if you are a calendar year taxpayer with a carryback from 2008 to 2006, you must file Form 1045 on or after the date you file your tax return for 2008, but no later than December 31, 2009

Claiming & Deducting a NOL Carryforward

If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the Other income line of Form 1040.

Corporate Taxpayers

Corporate Taxpayers (C Corporations) are also eligible to utilize the IRS’s Carryback and Carryforward rules and can use Form 1139 which is a Corporate Application for Tentative Refund.

How To Claim an NOL Deduction

If you have not already carried the NOL to an earlier year, your NOL deduction is the total NOL. If you carried the NOL to an earlier year, your NOL deduction is the NOL minus the amount you used in the earlier year or years. NOL’s when carried back to prior years should be applied to the oldest return first and then carried forward. Below you will find an example of a client letter when we applied IRS tax rules and regulations and carried a loss back to prior years receiving thousands in refunds the client did not know they could claim.

What Clients of John Dillard CPA Have to Say…

Mr. John Dillard, CPA

Dear John:

Here’s the information we discussed.  Will appreciate your taking a look at it and letting me know your recommendation.

John, I really appreciate the work you’ve done on my behalf.  You literally saved me thousands of dollars by going back to the prior years and “carrying back” my current year taxes.  You can be sure I won’t forget that or hesitate to recommend you to others.  I had been hoping to find a good accountant that I could trust and rely on to help me with my business and the Lord filled my need when he brought us together through the [Gwinnett] Chamber of Commerce.

Please let me know if I can be of any help to you or anyone you know with any Real Estate matters.  As you know, I have been serving Gwinnett and surrounding counties with their Real Estate needs since 1972.

Thanks again!

Very truly yours,

Beverly

President

We are much more than a CPA firm. For a CPA who We strive to do much more than just prepare your taxes. We look to understand your business from the bottom up, by looking at all facets of your business. We come alongside you in your endeavors to succeed as an entrepreneur. Though we do not expect it, some of our clients have invited us to treasured and special family events. However our long-term goal is that you life, your business and your retirement are all better off as a result of our business relationship.

At His CPA we work to retain the best CPA’s on our staff and whose desire is to serve the Lord, by serving You, our client. Our motto of “Serving Him…by Serving You, One Tax Return at a Time” is not just a watchword but a legacy. Serving clients by the “Golden Rule” is where the “rubber meets the road.” This is just part of a series of letters where we highlight just a few of the recommendations and client letters we have received. Call us today and put our staff to work for you making sure you pay your lowest legal tax, avoid unnecessary penalties and long range planning. We look to provide CPA and Tax Return Advice you can trust. Put an award winning CPA to work for you today as past winner of the Georgia Accounting Advocate of the Year Award.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta  CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31

Why are these verses here? Learn how HIS CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

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