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15628: 1040 - NOL and Hurricane or Disaster Relief


Hurricane + Disaster Relief

This return has a casualty loss from a hurricane and is using the standard deduction. Why is the NOL not being generated on Form 1045 page 3? 

 

If you are not seeing a calculated NOL on the return, you should review the amounts flowing to line 25 of Form 1045 pg 3 in view mode.

If you do not have Form 1045, page 3 in view mode, you can force print the form by using the PRNT screen. 

The non-business deductions are entered as a positive amount on line 6 of Form 1045, page 3. If the taxpayer is using the standard deduction, this amount would include their standard deduction plus the net qualified disaster loss (entered as a positive amount). The form then states to add lines 1, 9 (includes line 6), 17, and 21-24 to get the amount to enter on line 25. If this results in line 25 being either zero or a positive amount, no NOL is allowed. Per the 1045, page 3, line 25 "If the result is zero or more, you don't have an NOL."

Note 579 in view mode alerts you to the possible NOL that may be calculated if the taxpayer chooses to itemize instead of taking the standard deduction in this return: 

CONSIDER ITEMIZING DEDUCTIONS:
If:
- The taxpayer has a casualty loss reported on Form 4684 in a disaster area
- You have marked the "Loss qualifies for disaster relief" check box on screen 4684
- The taxpayer is not itemizing his or her deductions
- The casualty loss is big enough that the taxpayer's taxable income is less than "0" (zero)

Then:
- Consider itemizing the deductions. It is possible that by itemizing, the taxpayer will have a net operating loss that could be carried back to prior years to claim additional refunds.

You would need to determine if it is ultimately more beneficial for the taxpayer to take the standard deduction or to itemize deductions in this circumstance. To force itemized deductions when standard is generally more beneficial, use the Force Itemized box on screen A. This will change what amount carries to line 6 of Form 1045 which may result in NOL calculation on line 25. 

Note: In order for a personal casualty loss to be allowed and carried to the 1045, a FEMA code must be entered, or the Qualified disaster loss checkbox must be marked on the 4684 screen.

For more information, see the 1045 Instructions, 4684 Instructions, and Related Links below. 


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