Discussion:NOL Carryback and child tax credit
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Discussion Forum Index --> Tax Questions --> NOL Carryback and child tax credit
| July 6, 2009 | |
| Is there a special rule about NOL carryback and child tax credits? I carried the NOL from 2008 back 5 years. The tax before NOL was $4314. child tax credit was $1,800. When I carried the NOL back, the tax was wiped out and the child tax credit was reduced to zero and the additional child tax credit became $1,800. My calculation (and my software's calculation) shows that they should have recieved $4,314. The IRS sent a notice stating the refund should only be $2,514. Is this correct? I have tried to research but can not find anything. I would like to be sure before I call the IRS on this. | |
Taxguy1024 (talk|edits) said: | 6 July 2009 |
| Ok....I'll make a guess here. Since the limitation on the refundable amount of the credit is the lesser of (1) the total amount of the credit, or (2) 10 percent of the earned income in excess of $10,000.........my guess is that the NOL carryback reduced the taxpayers' earned income far enough to wipe out the refundable portion of the credit.........but that's just a guess. | |
| July 6, 2009 | |
| The instructions reads as the wages are used if there is an nol.
I prepared an "amended" 2003 return to verify the numbers that went on the 1045 and it changed the child tax credit to the additional child tax credit and included it in the refund. I appreciate the guess. Anyone else? | |
Taxguy1024 (talk|edits) said: | 8 July 2009 |
| I'll make another guess..........is it possible that either you have an incorrect birth date and there aren't three or more children that qualify....or the IRS has a wrong birth date and they don't show three qualifying children when there actually are?? | |
| 21 July 2009 | |
| I have the same situation. I carried back a 2007 NOL to 2005 and prepared a 1040X. (It was too late to file a 1045.) The 1040X caculated a refund of $2,500, but my client only received a $1,500 refund. The $1,000 difference is the additional child tax credit caculated on the 1040X. Just as with CinSee, when I carried the NOL back, the tax was wiped out and the child tax credit was reduced to zero and the additional child tax credit became $1,000. I too am wondering if there is some special rule about NOLs and child tax credits that I am not aware of and would like to know before I start contacting the IRS. | |
| 1 September 2010 | |
| Kevin, Do you know the answer to this? I am carrying back NOL from 2009 to 2004. | |
| 1 September 2010 | |
| I don't think that the IRS' computer software does what ours does. Theirs is programmed to say 'lower income, no tax, no child tax credit'. Ours is programmed 'no child tax credit, but yes, refundable additional child tax credit'.
In short, I think you have to attach the amended carryback 1040 and point out the NEW credit for which the taxpayer is eligible (along with any revised forms and schedules). | |
| 1 September 2010 | |
| Perhaps this is a dumb question, but was Form 8812 submitted with the carryback claim? I ask this because the IRS is usually a stickler for making sure that taxpayers attach the proper forms to the NOL carryback claim. | |
Nightsnorkeler (talk|edits) said: | 1 September 2010 |
| I just had the same thing happen when carrying back a 2007 NOL to 2005. I did attach form 8812 along with a detailed explanation on the amended return, still the taxpayer received the refund sans additional CTC, no letter of explanation either.
I'll post if I find out any more information as to why this happens, in the meantime does anyone else know? | |
| 1 September 2010 | |
| meaning you don't trust DaveFogel's or my answers. I needed that laugh. | |
Nightsnorkeler (talk|edits) said: | 1 September 2010 |
| Kevin, when I see an answer provided by you, Dave, and a few others on this board, I believe that I am getting the most reliable information possible. But in my situation as described the form was submitted as both of you suggested with no better results. It would seem to me that there might be more to this is all I was saying. | |
| 1 September 2010 | |
| like maybe the IRS is wrong and it is your job to fight for the taxpayer? | |
| 1 September 2010 | |
| Look at Pub 536 page 9, last section on the right under the Caution.:
"Finally, use your refigured taxable income (Form 1045, line 15, using the “After carryback” column) to refigure your total tax liability. Refigure your income tax, your alternative minimum tax, and any credits that are based on, or limited to, the amount of tax. (On Form 1045, use lines 16 through 25, and the “After carryback” column.) The earned income credit, for example, may be affected by changes to adjusted gross income or the amount of tax (or both) and, therefore, must be recomputed. If you become eligible for a credit because of the carryback, complete the form for that specific credit (such as the EIC Worksheet) for that year. While it is necessary to refigure your income tax, alternative minimum tax, and credits, do not refigure your self-employment tax." | |
Nightsnorkeler (talk|edits) said: | 1 September 2010 |
| Exactly, but I prefer to not have to fight in the first place, so if there is something additional I can do in the future to prevent this from happening I would like to. | |
| 1 September 2010 | |
| (I would argue that the instructions are not consistent: EITC (and other refundable credits) is not based on, or limited to, the amount of tax. Only non-refundable credits are based on, or limited to, the amount of tax. Thus the instruction is wrong or the illustration is wrong.) | |
| 1 September 2010 | |
| I found a reference in the Internal Revenue Manual that is supposed to discuss changes to the additional child tax credit (ACTC) when there's an NOL carryback, and the reference says look at IRM section 21.5.9.5.15. However, I did not find such a section in the IRM on the IRS website. Anyone else have access to this section? | |
Nightsnorkeler (talk|edits) said: | 2 September 2010 |
| 21.5.9.5.15 | |
| 2 September 2010 | |
| Thanks, Nightsnorkeler. When I searched for "21.5.9.5.15" on the IRS website, the link to the continuation page was an invalid URL. | |
Nightsnorkeler (talk|edits) said: | 2 September 2010 |
| I've had hit & miss success, sometimes just refreshing the page will work. I haven't had time yet to read it, just thought I'd post the link in case any one else wanted to. | |
| 2 September 2010 | |
| Does anyone else have a better url? I don't trust the one given by Nightsnorkeler. | |
Nightsnorkeler (talk|edits) said: | 2 September 2010 |
| HA!!
I still don't understand why you think I didn't trust you Kevin. My post clearly stated that I submitted the proper forms exactly as you and Dave suggested and got the same results as others who may or may not have attached the proper forms. Oh well, I guess I'll just have to accept your explanation that the IRS' computer doesn't do what the IRS manual says it is supposed to, and every time an NOL carryback results in ACTC a series of phone calls and/or letters to the IRS will be required to sort out the mess because the credit can't get processed on the first attempt. Sounds like a plan. | |
| 2 September 2010 | |
| I'm just yankin your chain, Nightsnorkeler. I'm glad you can take the humor in the manner in which it was intended.
| |
Nightsnorkeler (talk|edits) said: | 2 September 2010 |
| Thanks Kevin, like I said I hadn't read the info in that link yet. I guess my plan (and your suggestion) will have to do.
And I do appreciate your humor (usually) as we all need to laugh a little, even at work. | |
