13 Jan LOOKOUT SMALL BUSINESS OWNERS FILING IRS Form 1120-S or 1065 – Net Operating Loss (NOL) Carry backs trigger Alternative Minimum Tax (AMT)
Please be advised that Net Operating Losses carried back to previous tax years can trigger an Alternative Minimum tax liability in the previous tax year that the loss was carried to, even if you originally did not have a tax liability in the year the loss was carried to.
More importantly the Internal Revenue Code is quirky when it comes to net operating losses. By that I mean as I interpret IRC 172 you are obligated to carry net operating losses back to previous tax years BEFORE carrying the loss forward unless you file an election statement with the 1040 tax form in the year the loss is recognized that you irrevocably elect to relinquish the entire carry back period.
Without such a statement you should not presume it is within the statutes to carry any net operating losses forward. In fact I am of the opinion that you would loose the operating loss carry forward capability without either having an appropriate election statement relinquishing carry back or first carrying the losses back.
To carry back net operating losses use IRS form 1045. but be sure to first calculate what your Alternative Minimum Tax Liability will be taking into consideration the Net Operating Loss in the year the loss was carried to.
To irrevocably elect to not carry back losses you may want to consider wording your statement as follows:
“Pursuant to the Internal Revenue Code, Section 172(b)(3), (taxpayer name or names) irrevocably elects to relinquish the entire carryback period with respect to the net operating loss incurred for the taxable year ended ____”