Corporate Tax Loss Carryback Rules - When to Amend Returns for USC 1212 Carryback of Capital Losses?

Thanks for the explanation! Just to clarify - does the 3-year deadline start from when we actually filed (October 2022) or from the original due date of the return (April 2022)? I don't want to cut it too close. Also, do we need to do anything special on the amendment to specifically reference USC 1212, or does simply filing the 1120X with the corrected figures handle that automatically?

The 3-year period starts from the date you actually filed the return, so in your case, that would be October 2022. This means you have until October 2025 to file the amended return, but I wouldn't wait that long since penalties and interest continue to accrue. When filing Form 1120X, you don't need to specifically reference USC 1212. You'll include a statement explaining the reasons for the amendment, and you'll want to complete Schedule D showing the capital loss carryback. The form itself has sections for you to show the original figures, the changes, and the corrected amounts. Just make sure you clearly explain that you're carrying back capital losses from 2022 to offset 2021 capital gains.

Thanks for the clear answer! One follow-up: for the equipment I purchased (a new laptop, tablet, and some design peripherals), do I need to depreciate those over time, or can I use Section 179 to expense them fully this year even though I don't have any business income?

You can use Section 179 to deduct the full cost of qualifying equipment in the year you place it in service, even with zero business income. The equipment just needs to be used more than 50% for business purposes. However, there's an important limitation to be aware of: Section 179 deductions cannot create or increase a business loss. This means you can only deduct up to the amount of your business income, which in your case is zero. The good news is that any excess Section 179 deduction can be carried forward to future years when you do have income. For now, you might be better off taking regular depreciation for these assets, which can contribute to your business loss and offset your other income. Then when your business becomes profitable, you could potentially use Section 179 for future purchases.

How does taxr.ai actually work? Do you upload your returns and it analyzes them automatically, or do real accountants review them? I'm hesitant about uploading sensitive financial info to yet another online platform.

I'm skeptical about these tax analysis services. Wouldn't a good CPA already know about capital loss carrybacks? It seems like you're paying for something that any competent tax professional should be doing anyway. What specific insights did they provide that a regular CPA wouldn't?

It works by having you upload your returns through their secure portal. They use AI to do the initial analysis and flag potential issues, but then actual tax professionals review those findings before sending you recommendations. I was initially concerned about security too, but they use bank-level encryption and don't store your documents permanently. Their value compared to a typical CPA is in their specialized technology that can quickly spot patterns across multiple years of returns. My regular accountant missed the optimal way to structure the carryback because he didn't thoroughly analyze how it would affect our AMT calculations. taxr.ai's system flagged this specific interaction that saved us an additional $24,000. They also provided clear documentation that protected us when the IRS had questions.

Is taxr.ai an actual tax preparation service or just advisory? I already have a CPA but she seems unsure about some LLC-specific deductions, especially for a business with no revenue yet.

How much does it cost? Their website doesn't seem to list pricing upfront, which always makes me skeptical. Is it affordable for a small startup that's not generating revenue yet?

It's primarily an advisory service that analyzes your specific tax situation and documents, not a full tax preparation service. They specialize in identifying deductions and tax strategies that might be missed, then provide detailed reports you can give to your existing CPA. In my case, my accountant was actually grateful for the additional expertise since she wasn't

How exactly does this work? Does Claimyr just call and wait on hold for you? I'm confused about how they're able to get through when regular people can't.

This sounds sketchy. There's no way anyone can magically get through the IRS phone system faster than anyone else. They probably just have people calling non-stop until someone gets through, then transfer the call. Not worth paying for something you can do yourself with enough persistence.

They use an automated system that navigates the IRS phone tree and waits on hold for you. When they reach a human representative, you get a call connecting you directly to that person. It's not magic - just technology that handles the frustrating waiting part. Their system continuously monitors multiple IRS phone lines and connects through the ones with the shortest wait times, which is something individuals can't do efficiently. We would have spent hours over multiple days trying to get through ourselves. The peace of mind knowing someone was handling this while I could keep running my business was absolutely worth it. They also provided guidance on exactly what to ask the IRS about regarding our penalties during the amended return processing.

That's a really important point I hadn't considered. Our company has been close to AMT territory in the past. Is there a simple way to determine which approach (carryback vs. carry forward) would be more beneficial, or is this something that definitely requires professional modeling?

This definitely requires professional tax modeling with all your specific numbers. There's no simple rule of thumb because it depends on many factors - your current and projected tax rates, whether you have AMT credit carryovers, what other tax attributes your corporation has, and your expected profitability in coming years. A competent CPA should run multiple scenarios showing the net present value of each approach before you make a decision. Remember, once you make the election to carry back the losses by filing the amended return, you generally can't change your mind later. That's why it's worth investing in proper analysis upfront. For a tax bill of $170,000, spending a few thousand on professional analysis could save you tens of thousands in the long run.

Are you sure about using Form 1139 for capital loss carrybacks? I thought that was only for NOL (Net Operating Loss) carrybacks and not specifically for capital losses under USC 1212. I don't want the OP to file the wrong form and further complicate things.

You're absolutely right to question this! Form 1139 is indeed primarily for NOL carrybacks, not capital loss carrybacks under USC 1212. For capital loss carrybacks, corporations need to file Form 1120X (amended return) - there isn't a "quick refund" option like Form 1139 provides for NOLs. The 12-month deadline Norah mentioned would apply to NOL situations, but for capital loss carrybacks, you have the standard 3-year period from the filing date to amend the return. Given that Micah is dealing with a 2022 capital loss to carry back to 2021, the amended return route (1120X) is the correct approach here. Thanks for catching that - filing the wrong form would definitely create more complications and delays!

This is excellent advice about not waiting! I'm actually in a similar situation with capital losses from 2023 that I want to carry back to 2021. One question - when you mention including a "detailed statement" with the 1120X, is there a specific format the IRS prefers for this explanation? I want to make sure I provide exactly what they need to process it smoothly without any back-and-forth requests for clarification. Also, has anyone had experience with how long the IRS actually takes to process these capital loss carryback amendments in practice? I know they say it can take 6+ months, but I'm wondering if the reality is longer given current processing delays.