Thank you for pointing this out! I had no idea about the 80% limitation. Does this mean I need to file any special forms for my 2024 taxes next year when I use the NOL? And should I be keeping copies of anything specific from my 2023 return as proof?

Yes, when you apply your NOL to your 2024 taxes next year, you'll need to file Form 1045 Schedule B to show how you're applying the carryforward. It's a good idea to keep a complete copy of your entire 2023 tax return, especially Schedule A of Form 1045 where you calculated the original NOL. Also keep any supporting documentation for the business losses that created the NOL - receipts, invoices, mileage logs, etc. The IRS tends to look more closely at returns with NOLs, so being able to substantiate everything is important. I recommend creating a dedicated "NOL documentation" folder with copies of everything, since you might be carrying this forward for several years.

Good point about state taxes! I've also seen some states limit the amount of NOL you can claim in a single year, regardless of the federal 80% rule. My state (Illinois) has its own NOL worksheet that's completely different from the federal one.

This is exactly what I'm worried about. How detailed does the documentation need to be for proving the revenue decline was COVID-related? We definitely had a 32% drop, but how do I PROVE it was because of COVID vs other market factors? We're in manufacturing and there were supply chain issues, reduced orders, etc.

For proving COVID causation, you'll want to create a narrative document that connects specific COVID factors to your business decline. Include things like: emails from customers canceling or reducing orders citing COVID concerns, documentation of supply chain disruptions with vendor communications, any relevant COVID restrictions that affected your operations, contemporaneous business records showing canceled projects or reduced capacity. The key is showing a clear cause-and-effect relationship. Also maintain detailed quarterly revenue reports that clearly show the percentage decline from 2019 to 2021 for the same quarters. The more specific documentation you have linking COVID factors directly to your revenue decline, the stronger your position will be if audited.

My brother's construction business got audited for their ERC claim last month. They claimed about $135k total. The auditor mainly focused on two things: documentation of their revenue decline and making sure they didn't count wages that were paid with PPP funds. They had good records and passed, but the agent mentioned they're specifically targeting claims filed by third-party "ERC specialists" since they've found a lot of fraud there.

I didn't even think about the state implications! Do you know if the IRS automatically notifies state tax authorities when they find federal tax discrepancies?

States and the IRS do share information, but it's not always automatic or immediate. Some states have information-sharing agreements with the IRS, but the timing varies widely. In my experience, if the federal issue involved income that should have been reported on your state return too (like unreported 1099 income), you should probably expect the state to catch up eventually. It's usually better to be proactive and amend your state returns if needed. This often looks better than waiting for them to find it, and you might face fewer penalties for voluntarily correcting the issue.

I've helped clients with OICs, and they're definitely harder to get approved than regular payment plans. The IRS will only accept if they genuinely believe you cannot pay the full amount through any reasonable means. They look at your assets, income, expenses, and ability to pay. The process requires detailed financial documentation and can take 6+ months for a decision. The approval rate is only around 30-40%. Most people who think they qualify actually don't. Payment plans are approved much more easily and quickly. If you're considering an OIC, I'd recommend consulting with a tax professional first to assess your chances.

Thanks for mentioning this! I told my mom right away and she checked her online account with the IRS. Her return was processed correctly with me as her dependent, which makes this even more confusing. Seems like different IRS systems aren't talking to each other properly.

That's definitely the issue then - the system that processes tax returns correctly marked you as a dependent, but the system that distributes stimulus payments didn't get that information. Classic government tech problems! Based on everything I've seen in similar cases, you're very likely in the "safe harbor" category where you can keep the payment without worry.

I'm so sorry about your daughter. Yes, deceased person payments are one of the few cases where the IRS explicitly tells you to return the money. For dependent status confusion like OP's situation, they've been much more lenient. I think they realized the administrative cost of processing returns would exceed the benefits.

Does anyone know if TaxAct is better or worse than TurboTax with these kinds of issues? I've used TurboTax for years but their prices keep going up, thinking of switching next year.

I've used both TaxAct and TurboTax over the years, and they each have pros and cons. TaxAct is definitely cheaper than TurboTax, which is why I switched. The interface isn't quite as polished, but it gets the job done and has all the same capabilities for most standard tax situations. Both have similar occasional issues with payment processing and confusing messages. I'd say TaxAct's customer service is a bit slower to respond, but you're saving like $40+ depending on which version you need. If you have a straightforward tax situation, TaxAct is a good value. If you need lots of hand-holding or have a complex situation, TurboTax might be worth the extra money.

100% agree. I work in UX design and this is a perfect example of terrible user communication. Using technical terms like "VPS" without explanation and implying it's an IRS payment when it's actually their service fee is just awful design.