Ex:  $6,000 carryforward loss from previous year - $5,000 Income from Line 21 on Form 1120S which is normally entered on Line 1 of Sch K-1. With the 80% limit on income, I can use $4,000 of that carryforward loss against the $5,000 income leaving $1,000 taxable income (which is then added to personal Form 1040 as shareholder income). The remaining $2,000 carryforward loss can be used for future returns.

My question....If we use only the "allowable loss" amount or "income minus allowable loss" ($1,000) on Line 1 of Schedule K-1, then it will not match Line 21 (Ordinary Business Income/Loss) on Form 1120S ($5,000). Am I missing something? 

Not sure where to report the carryforward loss on Form 1120S or Schedule K-1. Or do we?