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If you filed your return timely but did not file

Carryback/ Unused

taxpayer with a carryback from 2005 to 2003,

Year

Carryover

Loss

the statement with it, you must file the statement

you must file Form 1045 on or after the date you

with an amended return for the NOL year within

file your tax return for 2005, but no later than

2002 . . . . . . . . . . . .

$3,000

$1,000

6 months of the due date of your original return

January 2, 2007.

2003 . . . . . . . . . . . .

39,000

37,000

(excluding extensions). Enter “Filed pursuant to

section 301.9100-2” at the top of the statement.

Form 1040X. If you do not file Form 1045, you

2004 . . . . . . . . . . . .

37,000

34,000

Once you elect to waive the carryback pe-

2005 (NOL year) . . . .

can file Form 1040X to get a refund of tax be-

riod, it is irrevocable. If you choose to waive the

2006 . . . . . . . . . . . .

34,000

28,500

cause of an NOL carryback. File Form 1040X

carryback period for more than one NOL, you

2007 . . . . . . . . . . . .

28,500

19,500

within 3 years after the due date, including ex-

must make a separate choice and attach a sepa-

2008 . . . . . . . . . . . .

19,500

9,700

tensions, for filing the return for the NOL year.

2009 . . . . . . . . . . . .

9,700

1,000

rate statement for each NOL year.

For example, if you are a calendar year taxpayer

2010 . . . . . . . . . . . .

1,000

– 0 –

and filed your 2002 return by the April 15, 2003,

If you do not file this statement on

due date, you must file a claim for refund of 2000

time, you cannot waive the carryback

tax because of an NOL carryback from 2002 by

period.

CAUTION

April 17, 2006.

How To Claim

Attach a computation of your NOL using

How To Carry an NOL Back

Schedule A (Form 1045) and, if it applies, your

or Forward

an NOL Deduction

NOL carryover using Schedule B (Form 1045),

discussed later.

If you choose to carry back the NOL, you must

If you have not already carried the NOL to an

first carry the entire NOL to the earliest car-

earlier year, your NOL deduction is the total

Refiguring your tax. To refigure your total tax

ryback year. If your NOL is not used up, you can

NOL. If you carried the NOL to an earlier year,

liability for a carryback year, first refigure your

carry the rest to the next earliest carryback year,

your NOL deduction is the NOL minus the

adjusted gross income for that year. (On Form

and so on.

amount you used in the earlier year or years.

1045, use lines 10 through 11 and the After

If you do not use up the NOL in the carryback

If you carry more than one NOL to the same

carryback column for the applicable carryback

years, carry forward what remains of it to the 20

year, your NOL deduction is the total of these

year.) Use your adjusted gross income after

tax years following the NOL year. Start by carry-

carrybacks and carryovers.

applying the NOL deduction to refigure income

ing it to the first tax year after the NOL year. If

or deduction items that are based on, or limited

you do not use it up, carry the unused part to the

NOL more than taxable income. If your NOL

to, a percentage of your adjusted gross income.

next year. Continue to carry any unused part of

is more than the taxable income of the year you

Refigure the following items.

the NOL forward until the NOL is used up or you

carry it to (figured before deducting the NOL),

complete the 20-year carryforward period.

you generally will have an NOL carryover to the

1. The special allowance for passive activity

next year. See How To Figure an NOL Carry-

losses from rental real estate activities.

Example 1. You started your business as a

over, later, to determine how much NOL you

sole proprietor in 2005 and had a $42,000 NOL

2. Taxable social security and tier 1 railroad

have used and how much you carry to the next

for the year. No part of the NOL qualifies for the

retirement benefits.

year.

3-year or 5-year carryback. You begin using

3. IRA deductions.

your NOL in 2003, the second year before the

Deducting a Carryback

NOL year, as shown in the following chart.

4. Excludable savings bond interest.

If you carry back your NOL, you can use either

5. Excludable employer-provided adoption

Carryback/ Unused

Form 1045 or Form 1040X. You can get your

benefits.

Year

Carryover

Loss

refund faster by using Form 1045, but you have

6. Student loan interest deduction.

2003 . . . . . . . . . . . .

$42,000

$40,000

a shorter time to file it. You can use Form 1045

to apply an NOL to all carryback years. If you

7. Tuition and fees deduction.

2004 . . . . . . . . . . . .

40,000

37,000

use Form 1040X, you must use a separate Form

If more than one of these items apply,

2005 (NOL year) . . . .

1040X for each carryback year to which you

refigure them in the order listed above, using

2006 . . . . . . . . . . . .

37,000

31,500

apply the NOL.

2007 . . . . . . . . . . . .

31,500

22,500

your adjusted gross income after applying the

Estates and trusts not filing Form 1045 must

2008 . . . . . . . . . . . .

22,500

12,700

NOL deduction and any previous item. (Enter

file an amended Form 1041 (instead of Form

2009 . . . . . . . . . . . .

12,700

4,000

your NOL deduction on Form 1045, line 10. On

1040X) for each carryback year to which NOLs

2010 . . . . . . . . . . . .

4,000

– 0 –

line 11, using the “After carryback” column,

are applied. Use a copy of the appropriate year’s

enter your adjusted gross income after applying

Form 1041, check the Amended return box, and

If your loss were larger, you could carry it

the above refigured items but without the NOL

follow the Form 1041 instructions for amended

forward until the year 2025. If you still had an

deduction.)

returns. Include the NOL deduction with other

unused 2005 carryforward after the year 2025,

Next, refigure your taxable income. (On

deductions not subject to the 2% limit (line 15a).

you could not deduct it.

Also, see the special procedures for filing an

Form 1045, use lines 12 through 15 and the

Example 2. Assume the same facts as in

amended return due to an NOL carryback, ex-

“After carryback” column.) Use your refigured

Example 1, except that $4,000 of the NOL is

plained under Form 1040X, later.

adjusted gross income (Form 1045, line 11, us-

attributable to a casualty loss and this loss quali-

ing the “After carryback” column) to refigure cer-

Form 1045. You can apply for a quick refund

fies for a 3-year carryback period. You begin

tain deductions and other items that are based

by filing Form 1045. This form results in a tenta-

using the $4,000 in 2002. As shown in the fol-

on or limited to a percentage of your adjusted

tive adjustment of tax in the carryback year. See

lowing chart, $3,000 of this NOL is used in 2002.

gross income. Refigure the following items.

the Form 1045 illustrated at the end of this dis-

The remaining $1,000 is carried to 2003 with the

•

The itemized deduction for medical ex-

cussion.

$38,000 NOL that you must begin using in 2003.

penses.

If the IRS refunds or credits an amount to you

from Form 1045 and later determines that the

•

The itemized deduction for sales taxes if

refund or credit is too much, the IRS may assess

you figured this deduction using the sales

and collect the excess immediately.

tax tables (for carrybacks to 2004).

Generally, you must file Form 1045 on or

•

after the date you file your tax return for the NOL

The itemized deduction for casualty

year, but not later than one year after the NOL

losses.

year. If the last day of the year falls on a Satur-

•

Miscellaneous itemized deductions subject

day, Sunday, or holiday, the form will be consid-

to the 2% limit.

ered timely if postmarked on the next business

•

day. For example, if you are a calendar year

The overall limit on itemized deductions.

Page 7

Publication 536 - Net Operating Losses (Nols) For Individuals, Estates, And Trusts - 2005 Page 7

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