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Common questions for NOLs and Form 172 in ProSeries

by Intuit•11• Updated 2 weeks ago

For tax year 2024 the IRS is released Form 172 to show the calculation of Net Operating Losses for Individuals, Estates and Trusts. This will generate automatically along with the NOL Worksheets but must be manually attached as a PDF attachment for e-filing.

Table of contents:

‣ Form 172 for tax year 2024
‣ E-filing with the Form 172
‣ Viewing a current year NOL on the NOL Worksheet
‣ Entering an NOL carryover for a new client
‣ Viewing the NOL amount that will carryover to next year
‣ Running a query for NOL clients
‣ Prior year information

Form 172 for tax year 2024

Starting in ProSeries 2024 a Form 172 will also generate for applicable returns. This form generates automatically and requires no manual entries. To make adjustments to the 172 use the NOL Worksheet.

To view Page 1 for current year NOL:

  1. Press F6 to bring up Open Forms.
  2. Type 172 and select OK to open the Form 172 Part I.

Form 172 Page 2 is required for tax returns that have a farming loss resulting in a NOL Carryback and is used to calculate the amount of carryover remaining.

  1. Press F6 to bring up Open Forms.
  2. Type 172ii and select OK to open the Form 172 Part II.

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E-filing with the Form 172

Form 172 must be manually attached as a PDF attachment.

  1. From the File menu, select Print.
  2. On the left side of the Print Center, choose Print Selected Forms.
  3. In the Print Selected Forms area, choose Selected Forms.
  4. On the right side of the Print Center, in the Print line, uncheck the Printer box and check the File (PDF) box.
  5. To identify the selected forms to printed, click the Choose button.
  6. In the Please Select Form(s) to Print window, choose the Form 172: Net Operating Losses. Hold down the CTRL or SHIFT key to select more than one copy of the form.
  7. Click OK.
  8. In the Print Selected Forms area, click Print.
  9. From the E-File menu, select Attach PDF Files.
  10. Click Add Attachment and browse to the PDF you need to attach.
    • If you are attaching a PDF created from ProSeries the default path for PDFs is C:\ProPDF\
  11. Select the PDF and click Open to begin the attachment process.
  12. For the Type column select Other.
  13. In the Form/Schedule and Description column enter: Form 172

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Viewing a current year NOL on the NOL Worksheet

  1. Press F6 to bring up Open Forms.
  2. Type NOL and select OK to open the Net Operating Loss worksheet.
  3. Any available NOL will show on line 24.

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Entering an NOL carryover for a new client

If you are entering a new client return and they have an NOL from a prior year:

  1. Press F6 to bring up Open Forms.
  2. Type CO and select OK to open the Federal Carryover Worksheet.
  3. Scroll down to line 14.
  4. Enter any regular NOL on line 14a in the 2023column.
  5. Enter any AMN NOL on line 14b in the 2023 column.

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Viewing the NOL amount that will carryover to next year

For most taxpayers, NOLs arising in tax years ending after 2020 can only be carried forward. See Net operating losses for more information.

When an NOL has been carried forward from a prior year, and there's a positive adjusted gross income in the current year, the NOL carryforward is used to reduce current year income. If all of the NOL carryforward isn't used in the current year, the remainder is carried forward to the next year. To see the carryforward amount:

  1. Press F6 to bring up Open Forms.
  2. Type CO and select OK to open the Federal Carryover Worksheet.
  3. Scroll down to line 14.
  4. The regular NOL carryforward will show on line 14a in the 2024 column.
  5. The AMT NOL carryforward will show on line 14a in the 2024 column.

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Running a query for NOL clients

ProSeries Professional has a Client Analyzer Query that can help you identify clients incurred a Net Operating Loss in 2021. To run the query:

  1. Go to the HomeBase.
  2. In the HomeBase view drop down menu, select Client Analyzer Queries.
  3. Under 1) Select Return Type select 1040 Individual.
  4. Under 2) Select Query scroll down to Net Operating Loss.
  5. Select the Go button to run the query.
    • If any clients are password protected you'll be prompted to enter the password to include them in the query. Clicking Cancel on the password field will skip the password protected return.
  6. Once the list is populated you can:
    • Open any client from this list by double clicking on the row.
    • Print this list by going to the HomeBase menu, and selecting Print HomeBase.
    • Export the list by going to the HomeBase menu, and selecting Export View.

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Prior year information

NOL deduction:

Losses arising in tax years beginning after December 31, 2017. This effective date means that losses that arose in tax years beginning prior to Jan. 1, 2018 won't be subject to the 80%-of-taxable-income limit. Taxpayers will have to distinguish between the two types of losses when computing the NOL deduction. In addition:

  • The NOL deduction is limited to 80% of taxable income without regard to the deduction for NOLs.
  • The NOL can't be carried back, but it can be carried forward indefinitely.
  • The two-year farming loss carryback is allowed.
  • Insurance companies get 2-year carryback and 20-year carryforward.

Carryovers to other years are adjusted to take account of the 80% limitation. For example:

  • In 2018, a calendar-year taxpayer has a $90,000 NOL. They have no other NOL carryovers. It carries forward the NOL to 2019, a year in which they had a taxable income of $100,000. The taxpayer's 2019 NOL deduction is limited to $80,000 ($100,000 80%). The remaining $10,000 can't be deducted in 2019, but it can be carried forward indefinitely.

Comparison of prior-years NOL rules with Tax Cuts and Jobs Act

Before Tax Cuts and Jobs ActTax Cuts and Jobs Act
The NOL deduction wasn't subject to a limitation based on taxable incomeNOL deduction is allowed for the tax year for an amount equal to the lesser of:
(1) the aggregate of the NOL carryovers to that year, plus the NOL carrybacks to that year; or
(2) 80% of taxable income, computed without regard to the NOL deduction.
Carryback: 2 years
Carryforward: 20 years		Carryback: Repealed, except for farming losses and insurance companies
Carryforward: Indefinitely
Farming losses:
5-year carryback
20-year carryforward		Farming losses:
2-year carryback allowed
Indefinite carryforward
Property/casualty insurance company:
2-year carryback, 20-year carryforward
NOL isn't subject to 80%-of-taxable-income limit
10-year carryback for specified liability losses (SLLs)Special rule repealed
3-year carryback for NOL attributable to a casualty or disasterSpecial rule repealed
NOLs attributable to corporate equity reduction interest losses (CERILs) couldn't be carried back to a tax year before the corporate equity reduction transaction (CERT) occurred.Special rule repealed
A real estate investment trust (REIT) couldn't carry back a NOL for a REIT year to any tax year preceding the year of loss.Special rule repealed
Taxable income for purposes of the 80% limitation is computed without regard to the deduction for dividends paid

This section will familiarize you with the process of electing to forego a net operating loss carryback to prior years.

Under code Section 172(b)(3), a net operating loss arising in 2019 must be carried forward to future years, unless the loss is from certain farm losses or insurance companies. Certain farm losses must be carried back to the earliest of the two taxable years preceding the tax year of the loss, and then carried forward, year-by-year until used up. This carryback is mandatory unless the taxpayer elects to forgo the carryback.

Prior to 2018, certain NOLs which qualify as eligible losses have a three year carryback period, rather than the standard two-year carryback period. Eligible losses include losses due to casualties or thefts which are attributable to a federally declared disaster for a qualified small business.

If an election to forego any NOL carryback is made, the NOL must be carried forward.

Follow these steps access the election:

  1. Press F6 on your keyboard to open the Open Forms window.
  2. Type "EL" and press Enter to open the Election Summary Worksheet.
    • You can access IRC Section 172(b)(3) by double-clicking in the applicable field.

The NOL Carryover on line 14a of the Federal Carryover Worksheet is calculated on the NOL Worksheet. This worksheet is only available in ProSeries Professional.

To view the worksheet:

  1. Open the client return.
  2. Press F6 on your keyboard to bring up the Open Forms window.
  3. Type in NOL on your keyboard to highlight the NOL Worksheet.
  4. Click OK to open the worksheet.

Additional information:

  • If line 24 minus line 23 is less than zero, that amount will appear on this year's Carryover Worksheet on line 14a.
  • If line 23 on the Net Operating Loss Worksheet shows a different amount than what is on the NOL Carryover Worksheet, line 14a,  the amount could be flowing from a K-1 Trust, line 11E.

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