Tax Accounting - Net Operating Losses (NOL)

Net Operating Losses (NOL)
Net Operating Loss (NOL) is the excess of deductible expenses over gross income for a business operation. The excess expense is labeled as NOL and reported this way on the tax return. The firm will not only have no taxable income for the year, but they will also be able to carry the loss back or forward, because the gross income was offset by deductible expenses.

NOL Limitations:
2-year carry back – For most NOL
3-year carry back – For casualty or theft and qualified small business NOL
5-year carry back – Farming NOL
20-year carry forward – For most NOL

NOL deduction should be reported on Schedule A (Form 1045)

Sample Questions 1 - 5


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