Fillable MI-1045 546054 7 2016 Application for Michigan Net Operating Loss Refund MI-1045

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MI-1045 546054 7 2016 Application for Michigan Net Operating Loss Refund MI-1045

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Michigan Department of Treasury (Rev. 09-16), Page 1 of 3
Application for Michigan Net Operating Loss Refund MI-1045
Issued under authority of Public Act 281 of 1967, as amended. Type or print in blue or black ink.
Year (YYYY) Month-Year (MM-YYYY) Month-Year (MM-YYYY)
For loss year or for loss year beginning
and ending
Filer’s First Name M.I. Last Name
Filer’s Full Social Security No. (Example: 123-45-6789)
If a Joint Return, Spouse’s First Name M.I. Last Name
, Street, or P.O. Box)
Spouse’s Full Social Security No. (Example: 123-45-6789)
Home Address (Number
City or Town State ZIP Code
IMPORTANT: Use your U.S. Form 1040 to complete this form. Do not consider net operating losses from other years. Do not include
income and losses sourced to other states, income and losses from oil and gas production and nonferrous metallic minerals extraction
that are subject to Michigan severance tax, or a federal net operating loss deduction (NOLD).
PART 1: COMPUTING THE NET OPERATING LOSS (NOL) (see instructions, page 4).
1. Wages, salaries, tips, etc. ...................................................................................................................... 1.
00
2. Interest income ...................................................................................................................................... 2.
.............................................................................................................................................. 3.
00
3. Dividends.
00
4. Business income or loss (attach U.S. Schedules C and F) ................................................................... 4.
00
5. Capital gain or loss (attach U.S. Schedule D) ....................................................................................... 5.
00
6. Other gains or losses (attach U.S. Form 4797) ..................................................................................... 6.
00
7. Pension, IRA, and annuities included in Adjusted Gross Income (AGI) ................................................ 7.
00
8. Net rent or royalty income ..................................................................................................................... 8.
00
9. Income or losses from partnerships, estates, trusts and S corporations (attach U.S. Schedule E) ........ 9.
00
10.
Other (e.g., all state and local refunds, alimony, taxable Social Security, unemployment
compensation) Describe:____________________________________________________________ 10.
00
11. Total Michigan Gross Income. Add lines 1 through 10. ......................................................................... 11.
00
12. ADJUSTMENTS: Only list adjustments to Michigan-sourced income
a. Payments to a retirement plan as an individual or self-employed person 12a.
00
b. Deduction for self-employment tax and self-employed health insurance 12b.
00
c. Educator expenses and/or moving expenses
.......................................... 12c.
00
d. Alimony paid and/or penalty for early withdrawal of savings
................... 12d.
00
e. Domestic production activities deduction (DPAD) sourced to Michigan
.. 12e.
00
f. Other adjustments to income including health savings account deduction 12f.
00
13. Total adjustments. Add lines 12a through 12f
....................................................................................... 13.
00
14. Michigan AGI. Subtract line 13 from line 11. If greater than zero, you do not have an NOL.
................
14. 00
15. Nonbusiness deductions: Add lines 12a, 12d and 12f
................................. 15. 00
16. Nonbusiness income included in line 11
a. Interest income
.............................................
16a.
00
b. Dividend income
...........................................
16b.
00
c. Net nonbusiness capital gains
(before any allowable exclusion)
..................
16c.
00
d. Pension, IRA, and annuities
.........................
16d.
00
e. Alimony received
..........................................
16e.
00
f. Other income
.................................................
16f.
00
17.
Total nonbusiness income. Add lines 16a through 16f
................................
17.
00
18.
Excess of nonbusiness deductions over nonbusiness income, subtract
line 17 from line 15. If less than zero, enter “0”
............................................
18.
00
19. Excess capital loss deduction (enter as a positive number. See instr.)
........ 19.
00
20.
DPAD sourced to Michigan (enter as a positive number)
.............................
20.
00
21.
Add lines 18, 19 and 20
.........................................................................................................................
21.
00
22.
Net operating loss. Combine lines 14 and 21. If greater than zero, STOP; you do not have an NOL
..
22.
00
The Michigan NOL may be carried back or forward in the same manner as is allowed by the Internal Revenue Code (IRC), which is typically back two years
and forward twenty. See U.S. Form 1045 for exceptions. An election to forgo the carryback period must be led in the same manner as required by the
IRC (attach a statement to your return for the NOL year). Any loss in excess of income subject to Michigan tax must be carried forward to the next year.
+ 0000 2016 73 01 27 4 Continue on page 2. This form cannot be processed as a carryback if page 2 is not completed and attached.
Reset Form
2016 MI-1045, Page 2 of 3
Filer’s Full Social Security Number
PART 2: COMPUTING A REFUND FROM AN NOL CARRYBACK
Step 1. Redetermine Michigan Income Tax
A B C
23. Year to which NOL is being carried back .......................................
24. Reported federal AGI for the year indicated on line 23 ................. 00 00 00
25. Additions from MI-1040, Schedule 1
............................................. 00 00 00
26. Balance. Add lines 24 and 25
........................................................ 00 00 00
27. Subtractions from MI-1040, Schedule 1
........................................ 00 00 00
28. Balance. Subtract line 27 from line 26
........................................... 00 00 00
29. Enter Net Operating Loss from line 22
.......................................... 00 00 00
30. Balance. Subtract line 29 from line 28
........................................... 00 00 00
31. Michigan exemption allowance...................................................... 00 00 00
32. Taxable balance. Subtract line 31 from line 30
............................. 00 00 00
33.
Tax. Multiply line 32 by tax rate of carryback year.
If less than zero, enter “0”.............................................................. 00 00 00
34. Nonrefundable tax credits.............................................................. 00 00 00
00 00 00
00 00 00
00 00 00
00 00 00
00 00 00
00 00 00
00 00 00
00
35. Tax due. Subtract line 34 from line 33. If less than zero, enter “0”
36. a. Refundable tax credits...............................................................
b. Tax withheld...............................................................................
c. Tax paid with prior returns..........................................................
d. Estimated tax payments ............................................................
37. Total of items 36a through 36d ......................................................
38. Tax previously refunded or carried to next year.............................
39. Balance of tax paid. Subtract line 38 from line 37
......................... 00 00
40. Overpayment. Subtract line 35 from line 39
................................. 00 00 00
Step 2. Computing the NOL deduction for subsequent carryback year(s)
Enter all numbers as positive numbers.
41. NOL from line 30
.......................................................................... 00 00 00
42. DPAD attributable to Michigan included on line 28
........................ 00 00 00
43.
NOL carryforward. Subtract line 42 from line 41. Enter line 43 on
line 29 of subsequent year
............................................................ 00 00 00
PART 3: COMPUTING THE NOL CARRYFORWARD
Required for NOL carryforward after carryback(s) or when making an election to forgo carryback.
Enter all numbers as positive numbers.
44. Year to which you are applying NOL
.............................................
45. Prior year NOL carryforward
.......................................................... 00 00 00
46. NOLD from year on line 44 (see instructions)
............................... 00 00 00
47.
Subtract line 46 from line 45. If less than zero, enter “0”, no
carryforward remains.
.................................................................... 00 00 00
48. DPAD attributable to Michigan claimed in year on line 44
............. 00 00 00
49.
Subtract line 48 from line 47. Carry this amount to next year’s
column until NOL is exhausted. Attach additional pages if necessary
00 00 00
Taxpayer Certication. I declare under penalty of perjury that the information in this
Preparer Certication.
I declare under penalty of perjury that this
return and attachments is true and complete to the best of my knowledge.
return is based on all information of which I have any knowledge.
Filer’s Signature Date Preparer’s PTIN, FEIN or SSN
Spouse’s Signature Date Preparer’s Name (print or type)
Preparer’s Business Name, Address and Telephone Number
By checking this box, I authorize Treasury to discuss my return with my preparer.
Mail your completed form to:
M
ichigan Department of Treasury,
Lansing, MI 48956
+ 0000 2016 73 02 27 2
2016 MI-1045, Page 3 of 3
Filer’s Full Social Security Number
Computation of Federal Modied Taxable Income (FMTI) for Household Income Only
NOTE: Do not complete Part 4 if electing to forgo carryback. The purpose of Part 4 is to compute the allowable NOLD when determining
eligibility for a Farmland Preservation Tax Credit. This part is also used to compute the allowable NOLD when determining eligibility for
the Homestead Property Tax Credit for years 2011 and prior. Effective 2012, FMTI is not used and an NOL is not allowed in determining
Total Household Resources.
PART 4: ADJUSTING THE NOL FOR HOUSEHOLD INCOME
Step 1. Figure the FMTI
A B C
50. Year to which NOL is being carried ...............................................
51. Reported AGI for year shown on line 50 without current NOLD ....
00 00 00
52. a. Adjustments to AGI including DPAD (see instructions) ..............
00 00 00
b. Capital losses, in excess of capital gains ($3,000 maximum) ...
00 00 00
53. MODIFIED federal AGI. Add lines 51, 52a and 52b ......................
00 00 00
b. axes
.........................................................................................
c. Contributions..............................................................................
54. a. Medical (see instructions for limitations)....................................
00 00 00
T
00 00 00
00 00 00
d. Interest.......................................................................................
00 00
f. Moving expenses.......................................................................
g. Miscellaneous (attach U.S.
00
e. Casualty loss
.............................................................................
00 00 00
00 00 00
Schedule A; see instructions)
........
00 00 00
h. Limit on itemized deductions .....................................................
00 00 00
i. If you did not itemize, use the standard deduction ....................
00 00 00
55. Enter the total of 54a through 54h, or 54i if you did not itemize ....
00 00 00
56. FMTI. Subtract line 55 from line 53. If less than zero, enter “0” ....
00 00 00
Step 2. Figure the Carryback (If you are not carrying the loss back, go to Step 3)
57.
Unabsorbed NOL. Enter your federal NOL as a positive amount
in
column A.................................................................................... 00 00 00
58.
NOL to be carried to next succeeding year through 2011.
Subtract line 56 from line 57. Carry the amount on this line to
the next column, line 57. If less than zero, enter “0”...................... 00 00 00
Step 3. Figure the Carryforward
59. Year the federal NOL occurred......................................................
60. Enter the amount of the original federal NOL as a positive amount 00 00 00
61. Total of all NOLDs used for previous years
................................... 00 00 00
62.
Subtract line 61 from line 60. This is the remaining NOL that can
be carried forward to the year on line 50
....................................... 00 00 00
63.
Subtract line 56 (FMTI) from line 62. This is the remaining
NOL to carry forward. If less than zero, enter “0”
.......................... 00 00 00
+ 0000 2016 73 03 27 0
2016 MI-1045, Page 4
Instructions for Form MI-1045, Application for
Michigan Net Operating Loss Refund
What is a Net Operating Loss?
general carryover periods used for federal NOLs also apply to
Michigan.
A net operating loss (NOL) occurs when a business has losses in
When there is a change in ling status, special rules apply to
excess of its gains. In general terms, a federal NOL is computed
carrying over a Michigan NOL, which follow the federal rules.
by starting with federal taxable income and making the
See Internal Revenue Service (IRS) Publication 536. A schedule
following modications: (1) eliminate the personal exemption
showing the calculations for the Michigan carryover must be
allowance, (2) eliminate capital losses in excess of capital gains
attached to the Form MI-1045.
and any excluded capital gains, (3) eliminate NOL carryovers
from other years, and (4) eliminate the excess of nonbusiness
The amount of the Michigan NOL used in carryover years must
deductions over nonbusiness income. If the end result is
be reduced by any domestic production activities deduction
negative, a federal NOL has been created for use in another tax
(DPAD), attributable to Michigan, claimed in the carryover
year.
year. For example, an NOL carryforward claimed in 2016 must
be reduced by any Michigan sourced DPAD included in your
The excess capital loss deduction is calculated on a U.S. Form
2015 AGI.
1045 Schedule A, line 21 or 22. An excess capital loss includes
a U.S. Form 1040 Schedule D loss that is limited to $3,000. The
When to File Form MI-1045
capital loss may be greater than $3,000 if nonbusiness capital
When carrying back a Michigan NOL to prior years, Form
losses were offset by business gains that are also reported on
MI-1045 must be led within four years after the date set for
U.S. Form 1040 Schedule D. Example: $10,000 nonbusiness
ling the return in which the NOL was incurred. For example,
stock loss and $50,000 gain from the sale of a business asset
if the original NOL was incurred in 2012, the original 2012
(U.S. Form 4797) produce a U.S. Form Schedule D gain of
return was due April 15, 2013. Form MI-1045 must be led by
$40,000. The $10,000 stock loss is an excess capital loss.
April 18, 2017 to carryback the 2012 Michigan NOL to a year
The Michigan NOL
that is otherwise outside of the general four-year statute of
limitations and claim a refund.
The Michigan NOL and net operating loss deduction (NOLD)
are computed independently from the federal NOL and NOLD.
When carrying the loss forward, the rst year that a loss
The calculation of a Michigan NOL (for taxable income
is used, a copy of the federal income tax return (U.S.
purposes) follows the same general format of the federal NOL
Form 1040) and all supporting federal tax schedules
calculation but uses federal adjusted gross income (AGI) as
and statements that substantiate the NOL (see Required
a starting point rather than federal taxable income. Therefore,
Attachments) must be attached to the Form MI-1045.
federal itemized deductions that may be used to create or
This documentation must be submitted for every year
contribute to the federal NOL are not taken into consideration in
a loss occurred that was elected to carry forward. If a
the calculation of the Michigan NOL.
carryover remains and until that loss is exhausted, include
a copy of the originally led Form MI-1045 with each Form
In addition, the Michigan NOL calculation must be further
MI-1040 that claims the NOLD. A schedule demonstrating how
modied to remove, to the extent included in federal AGI, any
the Michigan NOL has been used must also be included.
income and losses sourced to other states, income and related
expenses from Michigan oil and gas production and nonferrous
If an election to forgo the carryback is made, you are not
metallic minerals extraction subject to Michigan severance
required to le a Form MI-1045 until the year the loss is
tax and a federal NOLD. The Michigan NOLD is subject to
actually used to offset Michigan income (the rst year in which
allocation and apportionment as required by the Michigan
there is taxable income). Keep all records for the loss year(s)
Income Tax Act. See Revenue Administrative Bulletin 1998-3
until the NOL has been used and exhausted. If a Michigan
for additional guidance.
NOL is carried forward, Form MI-1045 should be led with
Form MI- 1040 to claim the Michigan NOLD. The NOL
In order to determine whether an NOL was incurred from
carryover must be used in consecutive years.
Michigan sources, regardless of whether or not there is a
corresponding federal NOL, complete page 1 of Form MI-1045.
Using Form MI-1045
Carryover of a Michigan NOL
Use page 1 of Form MI-1045 to calculate the Michigan
The Michigan NOL may be carried over in the same manner
NOL for the year of the loss. If the loss is carried back, also
and to the same time periods as provided for in Section 172 of
complete “Redetermine Michigan Income Tax” on page 2.
the Internal Revenue Code (IRC) in effect for the year the loss
Page 3 is used to determine the amount of the federal NOLD
was incurred. If the NOL is not exhausted in the carryback
that may be used to compute household income for the
years, or if an election is made to forgo the carryback (election
homestead property tax credit for tax years prior to 2012.
is irrevocable), an NOL carryforward will exist for subsequent
Page 3 is also used to compute the federal NOLD used in
years. The carryback period is generally limited to two years
household income for the farmland preservation tax credit.
for both federal and Michigan taxes, and any unused loss may
be carried forward for 20 consecutive years. Exceptions to the
2016 MI-1045, Page 5
When ling a refund claim from the carryback of a Michigan
preservation tax credit (Form MI-1040CR-5) for any year, subject
NOL, prepare the appropriate amended credit claim forms for each
to the statute of limitations. The farmland preservation tax credit
year the loss is being carried back and attach to Form MI-1045.
continues to be computed using household income, not total
household resources.
The total amount of the federal NOLD used to arrive at federal
AGI must be added back on Form MI-1040, Schedule 1.
The amount of the NOLD that is allowed cannot exceed FMTI
The Michigan NOLD is then subtracted on Form MI-1040,
in the year to which it is being carried back or carried forward.
Schedule 1. This amount is the NOL determined on Form
FMTI is computed by modifying federal taxable income to
MI-1045, page 1, line 22, less any of the loss used in previous
remove the federal exemption allowance, the capital loss
years. See the MI-1040 instruction booklet for specic line
deduction, DPAD, and the NOLD. For more information about
references for the years involved.
FMTI, see IRS Publication 536.
If there are Michigan NOLs from multiple tax years, the total
The amount of the allowable NOLD for use in household
unused losses must be combined and reported on Form MI-1040,
income is calculated on page 3 of the MI-1045 form for both
Schedule 1.
carrybacks and carryforwards. The amount of the carryback
Nonresidents and Part-Year Residents
deduction is the smaller of lines 56 or 57, and the amount of the
carryforward deduction is the smaller of lines 56 or 62.
Nonresidents and part-year residents may also be entitled to a
Michigan NOLD. In order to determine whether a Michigan
Example: Your 2012 FMTI is $20,000, and your 2012 federal
NOL was incurred, complete Part 1 of Form MI-1045 in the
NOLD is $50,000. The amount of the 2012 NOLD of $50,000
same manner as described in the section, “The Michigan NOL.”
that may be used in 2012 household income for a farmland
Only items sourced to Michigan may create a Michigan NOL.
preservation tax credit is limited to $20,000. The balance
of $30,000 will be available for use in a 2013 farmland
A federal NOLD must be removed from taxable income to the
preservation tax credit, to the extent of 2013 FMTI. There is no
extent included in federal AGI. Nonresidents and part-year
NOLD allowed for a homestead property tax credit for tax years
residents accomplish this by allocating the entire federal NOLD
2012 and later.
to Column C on Michigan Schedule NR. Do not add back the
federal NOLD as an addition on Michigan Schedule 1.
Claim the amount of the NOLD allowed on the “other
adjustments line” on the appropriate credit forms for each
In a carryforward year, the Michigan NOL must be claimed
applicable year.
on the Michigan Schedule 1 as a subtraction. Do not report a
Michigan NOL on Michigan Schedule NR.
NOTE: To deduct an NOLD from household income, there
must be a corresponding federal NOLD. If there is no federal
Required Attachments
NOLD in AGI, there is no NOLD to claim in household income.
Attach a copy of the federal income tax return (U.S. Form 1040)
Income and losses from other states, income and losses from oil
and all supporting federal tax schedules and statements that
and gas production and nonferrous metallic minerals extraction
substantiate the NOL. Be sure to indicate the location (city and
subject to Michigan severance tax, and federal itemized
state) of each source of income or loss. If there is income or loss
deductions must be considered when calculating the NOL and
subject to apportionment, see Schedule of Apportionment
NOLDs used for household income.
(Form MI-1040H).
Include any of the following schedules and accompanying
LINE-BY-LINE INSTRUCTIONS
statements that support the Michigan NOL:
Lines not listed are explained on the form.
• U.S. Form 1040, pages 1 and 2
Part 1: Computing the Net Operating Loss
• U.S. Form 1040 Schedule(s) A, B, C, D, E, F
To complete Part 1, use the entries on your U.S. Form 1040 for
• U.S. Form 4797
the year the loss occurred. Do not include income and losses
• U.S. Form 4835
sourced to other states, income and losses from oil and gas
• A ny other applicable documents, including U.S. Form 1040
production and nonferrous metallic minerals extraction that are
or 1041 Schedule(s) K-1.
subject to Michigan severance tax, a federal net operating loss
NOL Effects on Household Income
(NOL) deduction, or net operating loss deductions (NOLDs)
from other years.
An NOLD allowed in household income cannot exceed Federal
Line 10: Include all state and local refunds, alimony, taxable
Modied Taxable Income (FMTI) as dened in section 172(b)(2)
Social Security, unemployment compensation, and other income
of the IRC.
in your federal adjusted gross income sourced to Michigan.
An NOL is not used to determine total household resources. An
Line 14: Subtract line 13 from line 11. This amount will equal
NOLD requiring an FMTI adjustment is only applicable when
your federal AGI, less any federal NOLD, unless you have
computing household income for a homestead property tax credit
income or losses sourced to other states, income or losses
(Form MI-1040CR) for a carryback year prior to 2012.
subject to Michigan severance tax, or NOLDs from other years.
Alternatively, an NOLD requiring an FMTI adjustment is
Line 19: The excess capital loss deduction must be calculated
applicable when computing household income for a farmland
on a U.S. Form 1045 Schedule A, line 21 or 22, then entered
2016 MI-1045, Page 6
on this line. An excess capital loss includes a U.S. Form 1040
Line 52a: Add back any DPAD. Also, adjustments to AGI, such
Schedule D loss that is limited to $3,000. The capital loss may
as taxable Social Security benets and IRA deductions, must be
be greater than $3,000 if non-business capital losses were offset
recalculated based on federal modied AGI.
by business gains that are also reported on U.S. Form 1040
Line 54: Use 54a through 54h if you itemized. If you didn’t
Schedule D.
itemize, use 54i.
Line 20: Enter as a positive number the domestic production
54a: Medical adjustments. The amount of medical adjustments
activities deduction (DPAD) as calculated on line 12e.
allowed varies with federal law from year to year. You must
Part 2: Computing a Refund From an NOL
recalculate your medical expense deduction based on modied
Carryback
federal AGI and the federal limitation in effect for the year
entered on line 50.
Step 1. Redetermining Michigan income tax for
carryback year(s)
54c: Percentage limitations on charitable contributions are
based on modied federal AGI.
Line 36a: Enter the total of refundable credits for homestead
54g: Miscellaneous deductions are limited to 2 percent of AGI.
property tax, farmland preservation and any other refundable
This amount cannot exceed 2 percent of modied federal AGI.
credits claimed for the tax year(s) to which you are carrying the
loss. Any credit entered here must be adjusted for the NOLD
54h: If modied AGI exceeds certain amounts, itemized
adjustment to household income, if applicable. Be sure to attach
deductions may be limited. See limitations in effect for the year
your amended credit form.
entered on line 50.
Line 36c: For the year listed on line 23, enter total tax paid with
Line 56: This is your FMTI. Your Michigan NOLD will be the
Form MI- 1040 plus any additional tax paid after original return
amount on this line or the amount from line 57 (or line 60 for
was led.
carryforwards), whichever is smaller. This amount cannot be
Step 2. Computing the NOL deduction for subsequent
less than zero.
carryback year(s)
Line 57: Enter your federal NOL in column A as a positive
Step 2 removes DPAD from the amount of the NOL available to
amount. Each succeeding year will be the unabsorbed portion
be carried forward to the next year.
(if any) from line 58 of the preceding column.
Line 41: Enter the NOL from line 30 as a positive number.
Line 58: Subtract line 56 from line 57. If the result is more
than zero, this is the excess NOL to be carried forward to the
Line 42: Enter the amount of DPAD allocated or apportioned to
next year. If it is less than zero, the NOLD is limited to the
Michigan.
unabsorbed portion on line 57. This is the last year affected by
Line 43: Subtract line 42 from line 41, if less than zero enter
the NOL.
“0”. Then, enter your NOL carryforward on line 29 of the next
NOTE: Effective January 1, 2012 an NOLD cannot reduce
column.
total household resources and is no longer used on Michigan
Part 3: Computing the NOL Carryforward for the
Property Tax Credit and Home Heating Credit claims.
Subsequent Years
Line 63: If line 56 is less than line 62, subtract line 56 from line
The purpose of Part 3 is to calculate the NOL carryforward
62 and enter here; then use line 56 as your NOLD to recalculate
after utilizing an NOL carryback or after making an
your credit. If line 56 is greater than line 62 enter “0” and use
election to forgo a carryback.
line 62 as your NOLD to recalculate your Michigan credits.
Line 45: Enter the remaining NOL carryforward from the prior
Forms or Questions
year
Michigan tax forms are available at www.michigan.gov/taxes.
Line 46: Enter the amount of the NOL absorbed in the year
Call 517-636-4486 if you have questions or to request tax forms.
listed on line 44.
Line 48: Enter the DPAD attributable to Michigan that was
claimed in the year listed on line 44.
Line 49: NOL Carryforward. Enter this amount on line 45 of
the next column. Continue using Part 3 to calculate the NOL
carryforward for the following year until the NOL has been
exhausted or expires, whichever comes rst. Use additional
forms if necessary.
Part 4: Adjusting the NOL for Household Income
Line 50: May be applied to tax years 2011 and prior carrybacks
and the Farmland Preservation Tax Credit.
Line 51: Include NOL carryovers or carrybacks from earlier
years.
2016 MI-1045, Page 7
Michigan NOL Carryforward Example
A full-year Michigan resident born in 1942 has the following
Form MI-1040 for tax Year 00 reports the following:
business and rental activity reported on their U.S. Form 1040 in tax
•
Federal AGI
($41,170)
Year 00:
•
Additions
• Schedule C
•
Schedule 1, line 2: Deduction for SE taxes
$230
$18,000 Michigan and $2,500 Indiana
•
Schedule 1, line 4: Business loss, Ohio
$8,500
• Schedule E, Part 1, rental income
•
Schedule 1, line 7: Federal NOLD
$4,000
$6,500 Arizona
•
Schedule 1, line 8: DPAD, Ohio
$1,200
• Schedule E, Part 2, ow-through income (loss)
•
Subtractions
($87,000) Michigan and ($8,500) Ohio
•
Schedule 1, line 13: Business income, Indiana
$2,500
•
Self-employment tax deduction
•
Schedule 1, line 13: Rental income, Arizona
$6,500
$202 Michigan and $28 Indiana
•
Schedule 1, line 16: Michigan income tax
•
Domestic Production Activities Deduction [DPAD]
refunds included in AGI
$560
$2,000 Michigan and $1,200 Ohio
•
Schedule 1, line 25: Pension subtraction
$12,500
Federal adjusted gross income [AGI] is ($41,170) for Year 00.
•
Michigan income subject to tax
($49,300)
The taxpayer must complete the rst page of the MI-1045 to determine (1) if a Year 00 Michigan NOL exists, and (2) the amount of
the Year 00 Michigan NOL. In this example, a Michigan NOL exists and the taxpayer elects to forgo an NOL carryback. The full
NOL will be carried forward beginning with Year 01. The Michigan Year 00 NOL is calculated below.
Federal AGI Michigan MI-1045 Part 1
Year 00 Adjustments Year 00
Wages $25,000
$25,000
Interest Income 120
120
Dividend Income 80
80
Schedule C Income (Loss)
20,500
2,500 Indiana 18,000
Business income attributable to Michigan
Capital Gain (Loss) (3,000) (3,000)
Pension 12,500 12,500
Schedule E, Part 1, Income (Loss)
6,500 6,500 Arizona 0
Schedule E, Part 2, Income (Loss)
(95,500)
(8,500) Ohio (87,000) Business loss attributable to Michigan
Misc: State Tax Refunds 560
560
Other: Prior Year Federal NOL (4,000)
0 A
federal NOL
does not affect a Michigan
NOL calculation.
Total Income ($37,240) ($33,740)
Adjustments
Retirement Plan Contributions 500 500
Deductions for Self-Employment Tax 230 28 Indiana 202
DPAD 3,200 1,200 Ohio 2,000 DPAD attributable to Michigan
Total Adjustments 3,930 2,702
Federal AGI ($41,170) ($36,442)
Federal AGI attributable to Michigan
**For demonstration purposes
3,000 Excess capital loss deduction
assume for Year 00 the federal
(MI-1045, line 19)
NOL computes to $66,200. The
2,000 DPAD (MI-1045, line 20)
carryforward to Year 01, minus the
DPAD, is $63,000.
The DPAD is removed in the initial
calculation of an NOL, it cannot be
used to create or increase an NOL. ($31,442) Michigan NOL for Year 00
2016 MI-1045, Page 8
The Year 01 federal AGI is ($30,700), which consists of the
According to IRC section 172(b)(2) and modications
following:
referred to in IRC section 172(d), any remaining NOL, after
redetermining the tax must be reduced by the amount of
Wages $10,000
DPAD reported in that year before carrying the NOL to
Schedule C - MI (2,000)
another year.
Schedule C - IN 3,000
The Michigan NOL available as a carryforward to Year 02,
Schedule E, Part 1 – AZ (4,000)
($8,942) was reduced by DPAD attributed to Michigan ($500),
Schedule E, Part 2 – MI 15,000
thereby decreasing the Michigan NOL amount to $8,442.
Schedule E, Part 2 – OH (1,500)
The Year 02 federal AGI is $19,350, which consists of the
Pension 12,500
following:
Total Income $33,000
Wages $15,000
Federal NOLD from Year 0 0 carryforward (63,000)
Interest 250
Adjustment for DPAD – MI (500)
Dividend 100
Adjustment for DPAD – IN (200)
Schedule C – MI 14,000
Federa l AGI ($30,70 0)
Schedule C – IN 2,500
To determine the amount, if any,
of a Michigan NOL that
Schedule E, Part 1 – AZ 5,000
remains after being carried to another year, a calculation must
Schedule E, Part 2 – MI (5,000)
be made to determine how much Michigan income was offset in
Schedule E, Part 2 – OH 5,000
the carryover year. To calculate this amount, determine income
Pension 12,500
subject to Michigan tax (before the exemption allowance) without
Total Income $49,350
regard to the subtraction allowed for the Michigan NOLD. If this
Remaining federal NOLD from Year 01
amount is greater than the Michigan NOLD, the entire NOL is
used up, and none is available to carry to the next year. If this
carryforward after adjusting for DPAD of $700 (30,000)
gure is less than the Michigan NOLD, the difference will be the
Federal AGI $19,350
NOL available to be carried to the next year.
In Year 02 a subtraction is taken on the Michigan
The NOL available for carryover from Year 0 0 ($31,442)
Schedule 1 for a Michigan NOLD reporting the full amount
exceeds Michigan taxable income ($22,500) in Year 01, which is
available of $8,442. The available Michigan NOL does not
calculated without regard to the Michigan NOLD and Michigan
exceed Michigan taxable income of $24,350, calculated
exemptions. As such, the Michigan NOL absorbed in Year 01
without regard to the Michigan NOLD and Michigan
equals Michigan taxable income without regard to the Michigan
exemptions. The balance of the Michigan NOL from loss
NOLD and Michigan exemptions. A subtraction is taken on the
Year 0 0 is exhausted in the carryforward used in Year 02.
Michigan Schedule 1 for a Michigan NOLD, reporting the entire
Year 02 Michigan NOL Carryforward Computation
NOLD balance available in the tax year, in this case, $31,442.
The NOL carryforward to Yea
r 02 computes to $8,442.
Federal AGI $19,350
Year 01 Michigan NOL Carryforward Computation
Michigan Additions:
Federal NOLD 30,000
Federal AGI ($30,700)
Subtotal 49,350
Michigan Additions:
Michigan Subtractions:
Schedule E, Part 1 – AZ 4,000
Schedule C – IN 2,500
Schedule E, Part 2 – OH 1,500
Schedule E, Part 1 – AZ 5,000
Federal NOLD 63,000
Schedule E, Part 2 – OH 5,000
Adjustment for DPAD – IN 200
Pension 12,500
Subtotal 38,000
Total income subject to MI tax, without
Michigan Subtractions:
regard to the MI NOLD or MI exemptions
$24,350
Schedule C – IN 3,000
Michigan NOL carryforward available from Year 01 $8,442
Pension 12,500
Total income subject to MI tax after applying
Total income subject to MI tax, without
MI NOL (NOL absorbed) $15,908
regard to the MI NOLD or MI exemptions $22,500
MI NOL available for carryforward to Year 03 $0
Michigan NOL carryover available from Year 00 31,442
Total income subject to MI tax, without regard
to the MI NOLD or MI exemptions 22,500
MI NOL available for carryforward to Year 02
before adjustment for Michigan DPAD. $8,942
DPAD attributable to Michigan (500)
Total MI NOLD available for Year 02 $8,442
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MI-1045 546054 7 2016 Application for Michigan Net Operating Loss Refund MI-1045

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Completed 29 May 2020

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