Form 172 – NOL Carryforward, Carryback, How to File

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A client with a real Schedule C loss, a small capital loss from Schedule D, and a leftover loss from a prior year is exactly the file Form 172 was built for. It is the IRS net operating loss computation form for individuals, estates, and trusts, new for the 2024 tax year, and it moved the math that used to live in the Publication 536 worksheets onto a structured form.

Part I, lines 1 through 24, computes the NOL; Part II, lines 1 through 33, tracks the carryover. The deductible capital-loss cap on line 19 is $3,000, or $1,500 for married filing separately, and the carryover from Part II line 10 lands on Schedule 1 (Form 1040), Form 1040-NR, or the NOL deduction line of Form 1041. Get the lines out of order and the carryover reads wrong for years, so edit your source inputs first and avoid overrides.

Key Takeaways

• Form 172 is new for the 2024 tax year for individuals, estates, and trusts (before the December 2024 release the same computation lived in the worksheets inside Publication 536). 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 (lines 1 through 24) computes the NOL. Part II (lines 1 through 33) is the NOL Carryover computation: it refigures modified taxable income for any allowed carryback year and lands the carryover to the subsequent year on line 10. Treat the completed Part II 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 NOL calculator for noncorporate filers. 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, but only the line 24 figure is the answer, and only when it is less than zero; a zero or positive line 24 means no NOL, even if taxable income looked negative before the line 9, 17, and 21 through 23 add-backs. When you finish Part II, you have the modified-taxable-income computation that produces the line 10 carryover to the subsequent year, the figure 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	Compute the NOL carryover: modified taxable income, then the line 10 carryover to the subsequent year	Prior year impact is correct, and the line 10 remainder carries forward

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 the Part II line 10 carryover 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, and C corporations are not eligible to use Form 172 at all, they compute their NOL through the Form 1120 series and Form 1139 instead.
• 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, and remember that only the deductible portion of any Schedule D net loss, $3,000 (or $1,500 for married filing separately on Form 1040), flows into the NOL; the excess is stripped out on lines 18 through 22 so it does not enlarge the loss.
• 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, still complete Part II so line 10 captures the NOL carryover to the subsequent year.

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 II line 10, carryforward tracking

Part II line 10 is your bridge from this year to next year. The first preceding tax year column figure flows to the net operating loss line of Schedule 1 (Form 1040) or Form 1040-NR, or to the NOL deduction line of Form 1041. Record it in the carryforward register and keep it in sync with your proforma 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 II line 10 carryover summary 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 the Part II line 10 carryover 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 the standalone NOL computation document for individuals, estates, and trusts (replacing the worksheets in Publication 536). Part I computes the current year NOL on lines 1 through 24, and Part II handles the NOL Carryover computation on lines 1 through 33 – including any allowed carryback columns and the line 10 carryover to the subsequent year. 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	The completed Part II (lines 1 through 33), and specifically the line 10 figure, becomes your master carryover 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 (lines 1 through 24) and Part II (lines 1 through 33). 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 to land the NOL on line 24, then complete Part II to compute modified taxable income and the carryover to the subsequent year on line 10.
• Confirm the Part II line 10 figure from the 1st preceding tax year column equals the carryover you will report next year on Schedule 1 (Form 1040), Form 1040-NR, or the NOL deduction line of Form 1041.
• Tie the Part II line 10 carryover 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.
• Complete Part II, record the line 10 carryover, 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.

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 II line 10 carryover 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.

Common Mistakes We See Every Season

The patterns we catch in review are remarkably consistent. Five errors account for most of the rework on a Form 172 file.

Reusable Checklists

These checklists are written to drop straight into a firm SOP. Each line is a single action a preparer or reviewer can sign off in their tax software notes.

Keep 172 Season From Stalling

Form 172 is new ground. The IRS released the December 2024 revision as a standalone NOL computation document, replacing the worksheets that lived in IRS Publication 536 (per IRS Form 172 instructions). Software support rolled out unevenly across the 2025 filing season, and many firms picked up the form mid-cycle without a settled SOP. The first wave of files we reviewed showed the same pressure points: Part II columns filled in the wrong order, Schedule A refigured for clients who did not need it, and the Part I line 19 cap missed on Schedule D losses larger than $3,000.

The fix is structural, not heroic. The form is line-by-line predictable once the workpaper template forces preparers to walk it in order, and the review layer catches the misclassifications before they thread into a carryforward year.

• Build a Part I worksheet that prints lines 1 through 24 in order with formulas locking the line 9 add-back, the line 19 $3,000 / $1,500 MFS cap, and the line 24 combination of lines 1, 9, 17, and 21 through 23.
• Tag every deduction on the source return as nonbusiness or business before any number lands on lines 6 or 11. A misclassification at this step shows up two columns later as a wrong NOL.
• Add a Part II refigure trigger panel at the top of the carryback workpaper: individual filer, itemized in the carryback year, and a modification on Part II line 3, 4, or 5 greater than zero. All three must be yes before lines 11 through 33 open.
• Order the Part II carryback columns chronologically. Lock the 1st preceding column line 1 entry to a formula that pulls the 2nd preceding column line 10 figure.
• Keep a one-page carryforward register with year, originating Form 172 file, and remaining NOL so a reviewer can confirm the carryover figure without reopening prior returns.

This is how we run Form 172 files for clients who cannot absorb a rework cycle mid-season. Outsourced tax delivery with structured workpapers, multi-layer review, and turnaround SLAs takes the new form from a learning curve into a repeatable execution pattern.

FAQs

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 the Part II line 10 carryover schedule in your file so next year’s starting point is obvious and consistent with your proforma.