"will" <taxtimetr[at]att.net> wrote:

- quote -

I would agree with you that the IRS will grab the refund if
the NOL is carried back, especially if the IA is informal.
In this situation my initial recommendation would be to
carry the NOL back for several reasons.

First, the NOL would free up money that would get refunded
with interest;

Second, the refund, with interest could be used to reduce
the outstanding payroll liability - even if it is not
intercepted by the IRS.

Third, reducing the payroll liability will also reduce
future interest and penalties.

It would seem to be in the best interest of the taxpayer to
get this put behind him and be done with it. Unless there
are other items that you have not provided us with - which
I'm sure there are.

Gene E. Utterback, EA

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"will" <taxtimetr[at]att.net> wrote:

- quote -

Well the decision on how to use the NOL should almost always
be driven by how much tax you can offset with it, and I
don't see where an outstanding payroll tax liability changes
that significantly. If anything, unless there is a huge
disparity in previous tax wiped out versus going forward
(remember rates are now lower) then in this instance it
might make sense to create the refund and let them claim it
to offset the payroll tax owed. Just my 2¢ and not formal
advice.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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Question,
A business (SMLLC) is behind on their payroll taxes for
2002. There will be an NOL generated with the 2002 income
tax return when completed. The loss could be carried back
and free up tax paid in prior yrs or could be carried
forward to 2003.

Assuming the income tax reduction would be the same whether
the expected 2002 NOL is carried back or forward, and the
taxpayer is currently repaying the back payroll taxes in a
non formal installment arrangement and the account is on
hold for collection purposes, would you be more inclined to
carry the nol forward or backwards? If carried backwards i
would assume the IRS would have a right to grab the refund.
Thanks for any feedback.

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