Have we heard about the new NOL rules? We have, actually. And we’ve tucked that knowledge away for when and if it might apply to you. But it seems some companies are using the change in NOL rules as an opportunity to offer their services to help you recover your last 5 years of taxes paid. That promise is right up there with “settle your taxes for pennies on the dollar.” Sound too good to be true? That’s because in most cases, it is.
There is a chance that the new NOL provision will be helpful for some of you. But the reality is, that can’t be ascertained until the year is over. Yes, your income is down, your profits are nonexistent, and you’re looking for ways to be made whole. For that reason, it is enticing to think the IRS might owe you taxes back. But when your practice reopens and you try to pack in all those missed appointments along with your normal patient load, your revenues are expected to rise to at least normal levels, if not higher. By the end of the year, if you have recovered these losses at least to the point of break-even, you will not have an NOL to utilize. For this reason, it’s premature to really be thinking about NOLs. But when the year is over, if you have an NOL, we will certainly advise you the best way to utilize it.
But let’s talk NOL logistics for a moment. Carrying back an NOL to 5 years ago requires complex extra documents and a fair amount of fighting with the IRS. If the NOL isn’t large, it’s rarely worth it. It will take months for the IRS to accept the NOL after they send back additional requests for information or forms, which can’t be proactively submitted because they never ask for the same thing twice because they never do the calculation the same way twice. These NOL rules are actually not new at all. They were in place previously (though with a typical 3 year carryback provision) and were only recently eliminated and now reenacted. We suspect they were previously eliminated for same reason we rarely recommend them…it’s a broken process.