If you're carrying forward an NOL from a prior year, enter it through the Form 1045 Net Operating Loss Worksheet. The amount entered here may flow to Line 23 of Form 172.
Follow these steps:
- Go to Federal.
- Select Income (Select My Forms).
- Choose Less Common Income.
- Open Form 1045, Net Operating Loss Worksheet.
Once entered, the program will use that information when calculating your NOL deduction and any available carryforward.
How Do I Adjust Amounts That Are Automatically Pulled Into Form 172?
Form 172 can be accessed here:
- Go to Federal.
- Select Miscellaneous Forms.
- Choose Net Operating Losses.
The program automatically calculates Form 172 using the information already entered in your return. If you need to adjust amounts that were pulled into the form, you can make those adjustments directly within Form 172.
Keep in mind that Form 172 is primarily an adjustment form in the program. Changes you make there may affect the NOL amounts calculated throughout your return.
What Is Form 172 (Net Operating Losses)?
IRS Form 172 is used to calculate a Net Operating Loss (NOL) and determine how much of that loss can be carried forward to future tax years.
An NOL generally occurs when your allowable tax deductions are greater than your income for the year. When that happens, the unused loss may reduce taxable income in future years.
Our software automatically calculates a current-year NOL when applicable. Form 172 allows you to review and adjust the amounts that have been calculated based on your entries.
NOL carryforward rules
For NOLs arising in tax years after 2020, losses generally may only be carried forward to future tax years.
Certain farming losses may qualify for a 2-year carryback under IRS rules.
How Do I Know If I Have a Net Operating Loss?
You may have an NOL if your deductible business-related losses exceed your income for the year.
NOLs are commonly associated with deductions from:
- A trade or business
- Employment-related expenses that are deductible under current tax law
- Casualty and theft losses from federally declared disasters
- Qualified moving expenses, when allowed by law
- Rental property activities
The program will automatically determine whether your return generates an NOL based on the information you enter.
Will I Have an NOL Carryforward for Next Year?
Maybe. If your deductions exceed your income and create an NOL, any unused portion of that loss may carry forward to a future tax year.
You may also have a remaining carryforward if the NOL is larger than the taxable income available to absorb it in the year the loss is used.
To see whether you have an NOL available for a future year, review the PDF copy of your completed return. Any calculated carryforward amount will be shown there if one exists.
Tip
Keep a copy of your tax return and supporting worksheets whenever an NOL is generated. NOL carryforwards can affect future tax returns for many years, so having accurate records makes filing easier down the road.