How to Carry Over Losses to the Next Year on Income Taxes

by Michael Dreiser ; Updated July 27, 2017

The Internal Revenue Code generally allows individual income taxpayers with a net operating loss (NOL) to carryback the amount of the loss for up to two years. Individuals wishing to forgo the carryback may carryforward the amount of loss for generally up to 20 years. Taxpayers may claim this carryforward without filing any additional forms other than Internal Revenue Service (IRS) Form 1040, U.S. Individual Income Tax Return.

Step 1

Obtain Schedule A to Form 1045, Application for Tentative Refund from the IRS' website (see Resources) or through the mail by calling 1-800-TAX-FORM.

Step 2

Complete Schedule A to Form 1045 to figure the amount of your NOL you may carryforward. You will not need to file Form 1045. Retain for your records.

Step 3

Attach an election to your Form 1040 for the year in which you incurred the loss that you elect to forgo the carryback period under Internal Revenue Code Section Section 172(b)(3). You may make this election on a plain paper with your name and Social Security number included.

Step 4

List the amount of your NOL, computed using Schedule A of Form 1045, as a negative amount on the "Other Income" line of Form 1040 for the subsequent tax year.

Step 5

Subtract the amount of the NOL from all other sources of total income when completing Form 1040 for the subsequent year.

Step 6

Attach, to Form 1040 for the subsequent tax year, a statement that includes your computation of the NOL. You should include in this statement all the computations you performed in Schedule A of Form 1045.

Tips

  • Most taxpayers prefer to elect to carryback losses, since it provides them with an expedited refund. A carryback is generally completed by filing Form 1045, Application for Tentative Refund.

About the Author

Michael Dreiser started writing professionally in 2010. He is a certified public accountant with experience working for a large New York City accountancy and expertise in areas ranging from private equity taxation to investment management. He holds a Master of Business Administration in international finance from l’École Nationale des Ponts et Chaussées in Paris.

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