New IRS Form 172 and Revised Form 1045
The net operating loss (NOL) is now figured on new Form 172 (coincidently the NOL rules are in IRC Code Section 172). Form 1045 has been revised, and Schedules A and B have been removed. Figure an NOL using the new Form 172 and its Instructions.
Revised IRS Form 1045
IRS Form 1045 is utilized for applying for a quick refund resulting from applying an NOL to prior tax years. This form allows taxpayers to get an expedited refund by making a tentative adjustment of tax in the carryback year. Form 1045 must be filed within one year after the end of the NOL year, following the filing of the corresponding tax return.
NOL Carrybacks
A federal net operating loss (NOL) can generally no longer be carried back, unless it is a farming loss. For farming losses, the following applies:
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Farming businesses can carry back the NOL to each of the 2 tax years preceding the tax year of the loss.
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Alternatively, they can elect to forgo the carryback and carry forward the farm NOL to the year following the NOL year.
This rule change is part of the Tax Cuts and Jobs Act, which eliminated the carryback for most taxpayers but retained it for farming losses. Therefore, farmers have the option to decide whether to carry back their losses or carry them forward.
IRS Form 172
IRS Form 172 is used to figure the amount of NOL available for carryback or carryforward. It helps in computing the NOL and managing it by carrying it back to prior years or forward to future years, helping adjust taxable income accordingly.
Integration of Form 1045 with Form 172
Form 172 is critical when preparing Form 1045. It provides the necessary computations and supporting details about the NOL that need to be attached to Form 1045. Specifically, IRS Form 172 allows the user to figure the NOL's amounts, which is instrumental for taxpayers who opt to carry back their NOL using Form 1045. Each NOL must be substantiated with Form 172 when applying an NOL to past tax years via Form 1045.
Thus, while Form 172 itself does not replace Form 1045, it complements and supports it. Form 172 provides crucial calculations and documentation required for Form 1045 to apply NOLs to past tax years correctly. Both forms are pivotal to utilizing and maximizing tax benefits related to NOLs, and adhering to respective filing deadlines and requirements ensures taxpayers leverage these benefits fully.