Fillable Form 40: IA 123 Net Operating Loss (NOL) (State of Iowa - OCIO)

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Form 40: IA 123 Net Operating Loss (NOL) (State of Iowa - OCIO)

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IA 123 Net Operating Loss (NOL) Schedule
https://tax.iowa.gov
41-123a (07/19/19)
Name: Social Security Number:
Spouse’s Name: Social Security Number:
For additional information, see the Iowa Administrative Code rules 701—40.18 and 40.38. (While not
comprehensive, this may be helpful.)
Important Notices:
• Iowa did not conform with the federal changes to the carryback rules provided by the Tax Cuts
and
Jobs Act of 2017.
• For 2019 and later, the Qualified Business Income deduction and DPAD 199A(g) deduction taken on IA 10
40
l
ines 32 and 33 are not allowed in the computation of the Iowa NOL.
What caused the NOL? Check all that apply. Farming
☐ Casualty/Theft ☐ Business ☐
Other
☐: Explain _______________________________________________
Calculation of the Iowa NOL (Nonresidents and part-year residents see instructions.)
1. Net Income for loss year (fill in year) from IA 1040, line 26. ............................ 1.
2. Additions to Net Income
a. NOL claimed from previous year .......................................................... 2a.
b. Net capital loss from IA 1040, line 6 or capital gain deduction from
IA 1040, line 23. See instructions. ....................................................... 2b.
c. Nonbusiness Adjustments to Income .................................................... 2c.
d. Federal tax refunds (business and nonbusiness) from IA 1040, line 27.. . 2d.
e. Self-employment/household employment/other federal taxes from
IA 1040, line 28 .................................................................................. 2e.
3. Total Additions. Add lines 2a through 2e and enter here ............................................. 3.
4. Subtotal. Add lines 1 and 3 and enter here ................................................................ 4.
5. Deductions from Net Income
a. Federal tax payments (business related only). See instructions. ................ 5a.
b. Business deductions included in itemized deductions ............................ 5b.
c. Nonbusiness itemized deductions/adjustments/federal tax payments,
t
o the extent of nonbusiness income. See instructions. .................................. 5c.
6. Total subtractions from Net Income. Add lines 5a through 5c and enter here ............... 6.
7. Computed NOL. Subtract line 6 from line 4 and enter here .............................................. 7.
Note: If line 7 is a negative amount, continue to page 2.
If line 7 is not a negative amount, you do not have a NOL.
IA 123 Net Operating Loss (NOL) Schedule, page 2
41-123b (07/23/19)
Application of the IA NOL. See instructions.
Complete Part I if the NOL is not completely used up and a balance is available for carryforward
from line 14.
Complete Part II if the NOL is used in its entirety.
Part I: IA NOL is greater than taxable income in the carryback or carryover year
8. Iowa Taxable Income for carryback or carryover year (fill in year).
From IA 1040, line 38 for years 2013 forward, if applicable, or
IA
1040, line 42 for
years 2012 and prior. ........................................................................................................... 8.
9. Additions to Iowa Taxable Income, if applicable.
a. Capital loss from
IA
1040, line 6 or capital gain deduction from
IA
1040, line 23 .. 9a.
b. For 2019 and later, the Qualified Business Income deduction and DPAD 199A(g)
deduction from IA 1040 lines 32 and 33 (for tax years 2019 and later). .............. 9b.
c. Itemized deductions decrease due to 9a per amended federal return.
Applies only if a federal NOL is filed ................................................................... 9c.
10. Add lines 9a through 9c and enter here .................................................................... 10.
11.
If
applicable, increase in Iowa standard deduction. See instructions ........................... 11.
12. Subtract line 11 from line 10 and enter here ............................................................. 12.
13. Adjusted Taxable Income. Add lines 8 and 12 and enter here ..................................... 13.
14. NOL carryforward. Add lines 7 (less any prior applications) and 13, and enter here .... 14.
Part II: IA NOL is less than taxable income in the carryback or carryover year
15. Net Income for carryback or carryover year (fill in year) from the
IA 1040, line 26. Include capital gain deduction to the extent of the NOL. ................... 15.
16. NOL deduction less any prior applications. ............................................................................. 16.
17. Adjusted Iowa Net Income. Subtract line 16 from line 15 and enter here ................................ 17.
18. Enter all federal tax refund(s) and other federal taxes from IA 1040, lines 27 and 28 .............. 18.
19. Total. Add lines 17 and 18 and enter here .............................................................................. 19.
20. Deductions:
a. Federal tax paid from IA 1040. See instructions. .............................................. 20a.
b. Itemized deductions per original return or revised standard deduction ............. 20b.
c. Additional itemized deductions per amended federal return. Applies only if a federal
NOL is filed ...................................................................................................... 20c.
21. Total Subtractions. Add lines 20a through 20c and enter here ................................................ 21.
22. Taxable Income. Subtract line 21 from line 19 and enter here ................................................ 22.
Include this form with your Iowa income tax return for each year an NOL is attributable to Iowa.
IA 123 Net Operating Loss Schedule Instructions, page 1
41-123b (07/23/19)
Application of the NOL for Iowa Purposes:
For tax years beginning after August 5, 1997, the
NOL attributable to Iowa is subject to the federal
two-year carryback and up to a 20-year carryover
provision. This provision does not apply to
casualty losses and losses of farmers and small
businesses attributable to losses incurred in
presidentially-declared disaster areas (back 3,
forward 20). Effective for tax years beginning on or
after January 1, 1998, Iowa net operating losses
from farming may be carried back five years and
forward 20 years. However, taxpayers with net
operating losses from farming for tax years
beginning in 1998 or after can elect to forego the
5-year carryback provision and can carry back the
loss two years (three years for a loss in a national
disaster area or due to a casualty, storm, or theft.)
This federal election can be made on the federal
original return or on an amended federal return
within the 6-month period after the due date.
Election:
If there is both a federal NOL and an Iowa NOL
and a timely election is made to forego the
carryback period for federal purposes, that election
is binding for Iowa purposes. If an NOL occurs for
Iowa purposes but not for federal purposes, the
loss must first be carried back and then carried
forward for the carryback and carryforward periods
applicable to that tax year. No election to forego
the carryback period is allowable.
The federal Tax Cuts and Jobs Act of 2017
eliminated federal NOL carrybacks for taxpayers
other than certain farmers or insurance
companies for tax years ending on or after
January 1, 2018. Taxpayers who are not
permitted to carry back a federal NOL have not
elected to waive a federal carryback period, and
may not waive the applicable Iowa carryback
period on their Iowa NOL.
Classification of Income:
For purposes of identifying business and
nonbusiness deductions, refer to the federal
guidelines since they are applicable for Iowa
NOL purposes. In order to allow nonbusiness
deductions, a schedule showing all such
nonbusiness deductions must be provided.
Nonbusiness Adjustment to Income:
Nonbusiness adjustments to income which are
most common, but not limited to: IRA, HR-10,
early withdrawal penalty, alimony paid, disability
income exclusion, and pension exclusion.
Note: The health insurance deduction claimed on
your federal return as a business adjustment to
income can be classified as a business
deduction. Beginning with tax year 2014, Social
Security is not used to calculate Iowa Net
Income. Therefore, for years involving 2014 or
later, Social Security benefits are not income for
Iowa purposes and should not be used to
calculate the NOL.
Capital Gain and Loss Regarding
NOL Computation:
An individual or other non-corporate taxpayer can
deduct nonbusiness capital loss only to the extent
of nonbusiness capital gain. Beginning with tax
year 1994, any Iowa capital gain deduction must
be added back in the computation of the Iowa
NOL. Further, when applying an NOL from tax
year 1994 or later, the capital gain deduction is
not allowed in the carryback or carryover tax year
and must be added back to income to the extent
of the NOL.
Line 5a: For tax years prior to 2019, include only
the amount of federal tax payments from the IA
1040, lines 31-33 that are defined as business
tax payments for federal purposes.
For tax year 2019 and later, include only the
amount of federal tax payments from the IA
1040, line 31 that are defined as business tax
payments for federal purposes.
Note: For 2019 and later, the Qualified Business
Income deduction and DPAD 199A(g) deduction
taken on IA 1040 lines 32 and 33 are not
allowed in the computation of the Iowa NOL.
Line 5c: The total of nonbusiness itemized
deductions, nonbusiness adjustments, and
nonbusiness federal tax payments are allowed
only to the extent of nonbusiness Iowa income.
An itemized deduction schedule (Schedule A) for
the loss year must be included with the IA 1040X
amended return when making an itemized
deduction entry on this line. The federal tax
payment must be separated between business
and nonbusiness. While the business portion of
the federal tax payment is reported on line 5a, the
nonbusiness portion of the federal tax payment is
reported as an adjustment on line 5c subject to
limitation.
Note: For 2019 and later. the Qualified Business
Income deduction and DPAD 199A(g) deduction
taken on IA 1040 lines 32 and 33 are not
allowed in the computation of the Iowa NOL.
IA 123 Net Operating Loss Schedule Instructions, page 2
41-123d (07/19/19)
Part I: IA NOL is greater than taxable
income in the carryback or carryover year
Line 9a: Your deduction for the excess of
capital loss over capital gain is not allowed, and
you are not permitted the capital gain deduction
for the tax years that the exclusion/deduction
applies. If the loss year in the Calculation of the
Iowa NOL section of this schedule is 1994 or
later, then any capital gain deduction must be
added back to taxable income.
Line 9b: For tax year 2019 and later enter the
Qualified Business Income deduction and DPAD
199A(g) deduction taken on IA 1040 lines 32
and 33.
Line 9c: If you have filed a federal NOL
carryback or carryover for this same year, and
due to capital loss or capital gain exclusions in
the application year you were required to
decrease your medical expense deduction,
casualty and theft losses, and miscellaneous
deductions, enter the total amount of those
decreases on line 9b.
Line 11: If you claimed the Iowa standard
deduction in the carryback or carryover year and
you made an entry on line 9a, you may
recalculate your Iowa standard deduction and
enter the appropriate increase, if any, on line 11.
Lines 13-14: If a NOL is greater than the
adjusted taxable income in a carryback or
carryover year, an IA 1040X amended return for
the carryback year (IA 1040 for carryover year)
must be included showing no taxable income.
The remaining NOL on line 14 is to be carried
forward to the next tax year.
Part II: IA NOL is less than taxable income
in the carryback or carryover year
Line 20a: For tax years 2018 and prior, report
federal taxes from IA 1040, lines 31-33. For tax
years 2019 and later, report federal taxes from IA
1040, line 31.
Line 20b: Enter the itemized deductions allowed
on your original Iowa income tax return or the
revised Iowa standard deduction due to line 16.
The Iowa standard deduction must be
recalculated after application of the NOL
carryback/carryover in any year in which the NOL
is carried and fully absorbed.
Line 20c: If you also filed a federal NOL
carryback claim for this tax year and were
allowed to increase your itemized deductions for
medical expenses, casualty and theft losses, and
miscellaneous deductions due to the NOL
application, enter the increase in those
deductions on line 20c.
Line 22: Enter this amount directly on the
“Taxable Income” line of your IA 1040X and
include this schedule with the IA 1040X return.
No entry is necessary on the IA 1040X return
above the “Taxable Income” line in the
corrected computation column, but you must
continue your amended tax calculation after
that line.
Nonresidents and Part-Year Residents:
In order for nonresidents and part-year
residents to carry back or carry over an NOL,
that loss must be from Iowa sources. A loss
which is not from Iowa sources cannot be
reported anywhere on the Iowa return or
Schedule IA 126.
Nonresident or part-year resident taxpayers
should begin calculation of an Iowa NOL with
their Iowa-source Net Income from Schedule IA
126. Additions on lines 2a, 2b, and 2c should be
made only if these items are allocable to Iowa.
Federal tax refunds (line 2d) need be added
only in ratio with the taxpayer’s Iowa income
percentage in the tax year generating the
refund. Self-employment tax (line 2e) is added
only to the extent it is deducted on line 5a.
Federal tax payments (line 5a) may be deducted
only if the tax payment was directly attributable
to Iowa-source income. This includes federal
taxes withheld from Iowa-source income, or the
amount of additional federal tax paid for a prior
year in the current tax year prorated by the Iowa
income percentage for the prior year for which
the tax was paid.
Entries should be made on lines 5b and 5c only
as these items relate directly to income
allocated to Iowa on Schedule IA 126.
The Iowa-source NOL should be applied to the
Iowa-source income on Schedule IA 126 for the
carryback/carryover year. This will decrease the
Iowa-source Net Income for that tax year,
creating a lower Iowa income percentage, an
increase in the nonresident/part-year resident
tax credit, and may result in an overpayment for
the carryback/carryover tax year.
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Form 40: IA 123 Net Operating Loss (NOL) (State of Iowa - OCIO)

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Completed 22 November 2021

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