Net Operating Losses (NOL): Carryforwards and Tax Planning

Categories: Federal Tax, IRS CE
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About Course

Net operating losses arise when a taxpayer’s allowable deductions exceed gross income for the year. Under IRC §172, those losses do not disappear — they carry forward to offset income in future years, providing critical tax relief for individuals and businesses with variable income patterns.

This 2-hour self-study CE course covers the complete NOL lifecycle: how an NOL is computed on Schedule A of Form 1045, how the Tax Cuts and Jobs Act of 2017 permanently changed carryback and carryforward rules, how the CARES Act created a temporary 5-year carryback for 2018–2020 losses, and how IRC §382 limits NOL use after a corporate ownership change.

The course integrates the §461(l) excess business loss limitation, its five-stage interaction with basis, at-risk, and passive activity rules, and the §199A qualified business income deduction interaction with NOL carryforwards. The final module covers Form 1045 procedure, recordkeeping requirements, and the most common compliance errors that create audit risk.

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What Will You Learn?

  • Compute NOL on Schedule A of Form 1045 with all required modifications
  • Apply the post-TCJA 80% of modified taxable income limitation correctly
  • Identify NOLs eligible for the CARES Act 5-year carryback
  • Compute the §382 annual limitation after a corporate ownership change
  • Trace a loss through the five-stage §461(l) limitation cascade
  • Maintain compliant NOL tracking schedules and avoid common audit errors

Course Content

Module 1 – NOL Fundamentals — Computation and TCJA Rules
This module establishes the foundation of net operating loss taxation under IRC §172. Students learn how to compute an NOL using Schedule A of Form 1045, identify the required modifications to taxable income, and apply the post-TCJA rules including the elimination of the two-year carryback and the new 80% of modified taxable income limitation on carryforwards.

  • NOL Fundamentals — Computation and TCJA Rules

Module 2 – Carryforward Mechanics, CARES Act, and Special Carrybacks
This module covers the practical mechanics of NOL carryforwards under post-TCJA rules, including the 80% limitation calculation, tracking multiple-year NOL pools, and coordination with alternative minimum tax. Students also learn the CARES Act §2303 provisions that created a temporary 5-year carryback opportunity for NOLs arising in tax years 2018, 2019, and 2020.

Module 3 – Corporate NOLs and IRC §382 Ownership Change Limitations
This module addresses the special NOL rules that apply to C corporations, including consolidated return issues, separate return limitation year (SRLY) rules, and the §382 annual limitation triggered by a more-than-50% ownership change. Students learn to compute the §382 limitation using the value of the loss corporation multiplied by the long-term tax-exempt rate.

Module 4 – Tax Planning, §461(l) Excess Business Losses, and Compliance
This module covers the §461(l) excess business loss limitation applicable to non-corporate taxpayers, its five-stage interaction with basis, at-risk, and passive activity rules, and the §199A qualified business income deduction interaction with NOL carryforwards. The module concludes with Form 1045 filing procedures, NOL recordkeeping requirements, and the most common compliance errors.

Final Assessment – Net Operating Losses (NOL): Carryforwards and Tax Planning
This section contains the 20-question final examination covering all four course modules. A passing score of 70% (14 of 20 correct answers) is required to earn 2 CE Hours of Federal Tax Law Topics credit toward IRS Annual Filing Season Program or continuing education requirements.

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