NOL carryback

Our firm filed a 2009 amended individual income tax return just before the statute of limitations expired in April, 2013. This return created a very large NOL which we carried forward since you are not allowed to carryback an NOL when the statute of limitations has expired for the return that created the NOL (2009). The returns with the carryforward were returned by the IRS. Since we had not waived the NOL carryback, we had to reduce the carryforward by the NOL carryback, but would not receive any tax refund for the carryback, just a reduction of the carryforward. This seems to be a violation of the mitigation provisions of IRS Sec. 1311 - 1314. They are denying a deduction in the current and future years and then saying the deduction cannot be taken in the prior years due to the statute of limitations. Is there some of section of the code or regs that allow them to do this in this situation?

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Waiving the Carryback Period

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To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3).

If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months of the due date of the return (excluding extensions). Attach a statement to your amended return, and write ?Filed pursuant to section 301.9100-2? at the top of the statement.

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So if the tax return was due 3/15/2010 and you filed for a 6 month extension, the election should have been made by 9/15/2010. If you file late, tough, though there is probably a medical exception.