Your goal with Form 172 is simple, figure the NOL correctly, document the carryback or carryforward, and leave a clean trail so next year’s return starts on solid ground.
Key Takeaways
- Form 172 is new for the 2024 tax year for individuals, estates, and trusts. You use it to compute the current year Net Operating Loss, apply a carryback only when allowed, and track the carryforward.
- Carrybacks are generally out for post‑2020 NOLs, except for limited farming losses. That exception can carry back two years. Most NOLs now carry forward.
- Part I computes the NOL, Part II handles carrybacks when applicable, and Part III tracks carryforwards year by year. Treat Part III as your single source of truth for future years.
- Edit source inputs first, avoid unneeded overrides. This keeps your numbers consistent in the return, the e‑file, and your PDF.
- Software support has varied, so build a simple review checklist that confirms form status, e‑file readiness, and correct attachments before you transmit.
What Form 172 actually does, in plain English
Form 172 is the IRS’s three page calculator for noncorporate NOLs. It separates business and nonbusiness items so the computation does not drift, then it tells you what portion, if any, can carry back, and what must carry forward. The form applies section 172 rules, including limits on which items can create or increase an NOL and the modern carryback and carryforward framework.
You will notice how the form forces discipline. Capital items are handled in the right lane, nonbusiness deductions are kept off the business side, and the math ends with a documented number you can defend. When you finish Part I, you know if you have an NOL. When you finish Part II, you know whether anything goes back to prior years. When you finish Part III, you have a schedule that tells next year’s preparer exactly where to begin.
Why this matters now
- Many returns in 2024 and 2025 include losses from concentrated business activity, real estate adjustments, or casualty events, which means more NOL cases.
- State conformity varies, so a clean federal carryforward schedule makes state work faster and safer.
- Busy firms lose time in review because workpapers do not tie to the form. A tidy Form 172 packet speeds approvals and avoids rework.
Form 172 at a glance
| Part | Purpose | What you confirm |
| Part I | Compute the current year NOL with business vs nonbusiness separation | The NOL exists, and it is computed using allowed items only |
| Part II | Apply the allowed carryback, mainly farming cases | Prior year impact is correct, any remainder carries forward |
| Part III | Track the carryforward by year | Next year’s starting point is clear and documented |
Keep the table above next to your reviewer checklist. It helps you spot missing workpapers before the file hits final review.
The rules you need to remember
- Most post‑2020 NOLs do not carry back, they carry forward. Certain farming losses still get a two year carryback, so check that before you default to carryforward only.
- When NOLs carry forward into later years, you may face an 80 percent of taxable income cap in those later years. Your software usually applies it, still, verify it and note it in your memo.
- Not every deduction belongs in the NOL. The instructions list items you cannot use to create or increase the NOL. Keep that list handy when you reconcile Part I.
Where to find Form 172 in software, and why source edits come first
Most suites keep Form 172 under Federal, Miscellaneous Forms, Net Operating Losses. The program pulls numbers from your income, capital items, and deductions screens. If an amount looks wrong, fix the originating screen first. Use overrides only when a specific line requires a treatment the input screens cannot model. After you correct the source, recalc, regenerate the PDF, and make sure Part III matches your carryforward memo.
Ops reality, where firms get stuck
Firms rarely stall because they cannot win work. They stall because delivery breaks, capacity spikes crush reviewers, and documentation is thin. If you are tempted to throw offshore staffing at the problem, remember, capacity without structure creates chaos. Standard operating procedures, structured workpapers, and a layered review process are what keep Form 172, and everything else, moving. If you outgrow ad hoc fixes, Accountably can integrate trained offshore teams into your systems with SOP driven execution, clear turnaround windows, and review protection so partners spend less time untying NOL knots and more time on client strategy.
Step by step, complete Form 172 without rework
Part I, compute the NOL
Work top down with your workpapers and the instructions open.
- Confirm the NOL year and taxpayer type. Individuals, estates, and trusts use Form 172. Partnerships and S corporations do not take entity level NOLs.
- Separate business from nonbusiness items. Nonbusiness deductions, for example IRA or HSA, sit on the nonbusiness lines, not on the business side.
- Reconcile capital items. Keep nonbusiness capital losses within nonbusiness capital gains for NOL purposes.
- Exclude items the instructions prohibit from creating or increasing an NOL.
- If excess business loss applies, tie to Form 461 and bring any disallowed amount into the carryover as required.
Pro tip, leave a short note for each adjustment with the exact instruction line you used. Reviewers will clear files faster when they do not have to guess why a number moved.
Part II, carryback in limited farming cases
If you have a qualifying farming loss, apply the two year carryback.
- Refigure modified taxable income for the earliest carryback year.
- Apply ordering rules, then move any remainder to the next carryback year.
- If any NOL remains after the carryback years, carry it forward.
- If no farming carryback applies, skip Part II and proceed directly to Part III.
When a quick refund is at stake for a carryback year, evaluate whether a tentative refund form fits your client’s facts, and confirm the software supports it before you promise a timeline.
Part III, carryforward tracking
Part III is your bridge from this year to next year. Record the carryforward amount by year and keep that in sync with your proforma. Add a one line note about the 80 percent limit if it will apply in the next usage year, then save the memo in your workpaper index so the next preparer can find it fast.
A reviewer friendly workpaper packet
Make it easy to approve.
- A one page cover with, NOL year, whether a farming carryback applies, and the computed carryforward.
- A Part I tie out that lists each adjustment and the instruction line reference.
- A Part II worksheet for carryback cases, with modified taxable income by year.
- A Part III table that matches the next year proforma.
- A reference note to any Form 461 impact.
A tidy packet trims minutes off every review, which adds up when your team is under peak season pressure.
Adjusting amounts the right way
Fix the source, save overrides for edge cases
The form auto pulls from the return. If wage, business, Schedule D, or deduction amounts are off, correct the originating screens so everything recalculates. If you must override a specific line on Form 172, do it only after you update the source and add a short note in your review log that points to the reason. Then recalc and reprint to verify the carryforward did not drift.
A quick path you can copy into your workflow tool
- Confirm form status in your product’s form availability tool, note Final and e‑file ready dates.
- Verify Part I lines tie to return inputs and the instruction rules.
- If a farming carryback applies, compute modified taxable income and attach your worksheet.
- Confirm Part III matches your carryforward memo and next year’s proforma.
- Validate the e‑file package includes Form 172 when you are claiming an NOL.
Current revision and what changed
The 2024 launch formalized Form 172 as a three page calculator for current year NOLs and carryforward tracking, with Part II retained mostly for limited farming carrybacks. The practical shift for most preparers is not in the math, it is in the expectation that you will attach the form when you claim an NOL and keep a formal carryforward schedule by year.
| Focus | What it means for you |
| Scope | Individuals, estates, and trusts compute NOLs and track carryforwards on Form 172 |
| Carryback | Generally disallowed after 2020, limited two year carryback for certain farming losses |
| Overrides | Adjust the underlying screens first, override only when a line requires it |
| Documentation | Part III becomes your master carryforward schedule for future years |
| Filing clarity | If you are using an NOL, attach Form 172 so the carryforward trail is clear |
People and process that keep you out of trouble
Returns miss deadlines when teams scramble, not when clients vanish. If you add offshore capacity, treat it like building operations, not buying resumes. That means SOP driven execution, structured workpapers, a multi layer review, and clear SLAs for turnaround. Accountably works this way by design, integrating trained offshore teams inside your systems to reduce revision cycles and protect partner time in review, which is exactly where Form 172 tends to bog down.
Where to report your NOL and how to avoid e‑file drama
Navigation path you can rely on
Go to the Federal section, open Miscellaneous Forms, then Net Operating Losses, and select Form 172. Review Part I through Part III. If amounts do not match your workpapers, update the income, capital, and deduction screens that feed the form. Recalculate, regenerate the PDF, and make sure the e‑file set reflects the same numbers. When a product update lands, repeat the calc and e‑file generation so your attachments and schema stay in sync.
When software is behind your calendar
In early 2025, some products exposed the form earlier than others, and e‑file readiness shifted as vendors finalized mapping. If your availability tool shows Not Final, do this.
- Park the return in a Waiting on Form status with an automatic follow up date.
- Note the vendor’s expected release date on the card so the file does not age out.
- If the client asks about timing, share a short note that you are waiting on an IRS form integration update and that the return will transmit as soon as the form is e‑file ready.
- If a farming carryback needs a quick refund, consider whether a tentative refund path fits while you wait.
Attachment hygiene
- Confirm Form 172 prints cleanly and appears in the e‑file package where expected.
- If your suite embeds PDFs or statements, label them clearly so reviewers know exactly what they are approving.
- After each program update, regenerate the entire e‑file set, recheck diagnostics, and compare the on screen form to the e‑file contents.
Do I have a carryforward NOL for next year
Usually you will. Here is how to confirm.
- Finish Part I, then scan Part II for carryback only if a farming loss applies.
- Open Part III and verify the carryforward number and year.
- Tie Part III to your carryforward memo and next year’s proforma.
- If the NOL will be used next year, note the 80 percent limitation and keep the reminder in your memo so the next preparer does not overapply it.
Common pitfalls and fast fixes
Mixing nonbusiness deductions into the business bucket
Keep nonbusiness deductions, for example IRA or HSA, on the nonbusiness lines. If you drop them into the business column, you will overstate the NOL and invite rework.
Forgetting the 80 percent limitation when using carryforwards
When an NOL carryforward offsets income in a later year, cap the deduction as required. Most software handles the limit, still, verify it and leave a short note in the workpapers so reviewers do not have to reverse engineer your assumption.
Overriding instead of fixing source data
Overrides break the trail between the return and the form. Fix the originating screens first, then override a line only if the instructions demand a treatment the inputs cannot capture. Always recalc and reprint afterward.
Practical scenarios you can use right now
Schedule C loss with capital gains and nonbusiness deductions
- Start with your Schedule C loss.
- In Part I, limit nonbusiness capital losses to nonbusiness capital gains, and remove items the instructions exclude from NOL computation.
- If excess business loss applies, use Form 461 and include the disallowed amount in the carryover as appropriate.
- Move to Part III, record the carryforward, tie it to your proforma, and note the 80 percent cap for the year of use.
Farming loss with partial carryback
- Identify the farming portion of the NOL.
- Use Part II to carry back two years, compute modified taxable income for each carryback year, apply ordering rules, then move any remainder to carryforward.
- If a quick refund is appropriate, confirm the right path and software support before committing to a timeline.
FAQs about Form 172
What is Form 172 used for
It computes your net operating loss for the year, applies a carryback only when the law allows it, and documents the carryforward by year. You attach it when using an NOL so your carryover trail is clear for the IRS and for next year’s return.
Can I e‑file Form 172
Yes, if your software supports it and the form is marked e‑file ready. Check your product’s form availability tool, then regenerate the e‑file set after any update and confirm the form appears in the package before you transmit.
What is Section 172
Section 172 is the law that governs how you compute and use NOLs. It sets the no carryback rule for post 2020 losses with a limited farming exception, and it sets the carryforward rules, including limits that may apply when you use the NOL in later years.
When was Form 172 created
The IRS created Form 172 for the 2024 tax year. Software support rolled out during the 2025 filing season, which is why you may have seen different availability dates across products.
Do I need to attach Form 172 when I claim a carryforward
Attach it when you use an NOL. Keep Part III in your file so next year’s starting point is obvious and consistent with your proforma.
State conformity and planning notes
Federal and state rules do not always match. Before you copy the federal carryforward to state, check your state’s conformity date and whether it follows the same carryback and carryforward rules. Leave a short state memo in the file, either confirming conformity or noting differences, and add any state specific forms or worksheets to your packet.
Compliance note and trust signals
This article summarizes IRS rules for Form 172 as used for the 2024 tax year. For returns that use the form in 2025 or later, confirm you are working from the current instructions. Nothing here is tax advice for your specific facts. Always review the instructions, your software diagnostics, and your workpapers before you file.
Final checklist you can run in five minutes
- Verify form status and e‑file readiness in your product’s availability tool.
- Complete Part I using the instruction rules, document each adjustment.
- Apply carrybacks only for qualifying farming losses, otherwise plan to carry forward.
- Respect the 80 percent limit when using carryforwards in later years.
- Attach Form 172, store a clean Part III schedule, and sync it to next year’s proforma.
- If a file stalls due to capacity or review bottlenecks, fix the delivery system, not just the headcount.
When offshore helps, and when it hurts
Offshore is not a shortcut, it is an operating model. It only works when you have SOPs, structured workpapers, defined QC, and clear SLAs. That is how you keep Form 172 files moving without last minute heroics. If you need a partner that integrates trained offshore teams inside your systems with review protection and predictable turnaround, Accountably does that work for CPA and EA firms that cannot risk missed deadlines or messy carryforwards.
Your best NOL files feel boring in the best way, clear math, tight documentation, and a carryforward schedule your future self will trust.