How to properly carry forward a Net Operating Loss (NOL) on 1040 for my S-Corp LLC

You're dealing with a common confusion about S-Corp pass-through losses. Here's what you need to know: First, NOLs work differently after the Tax Cuts and Jobs Act changes. For S-Corps, losses pass through to your personal return, but there are limitations based on your basis in the company. 1. The NOL amount doesn't go on line 21 of Form 1040 directly. The loss first flows through on your Schedule K-1 from the S-Corp, then to Schedule E, and finally to your 1040. If the loss exceeds certain thresholds, then it becomes an NOL. 2. You can claim the entire amount of your distributive share of the loss, BUT only to the extent of your basis in the S-Corp. If you don't have enough basis, the excess loss gets suspended until you increase your basis in future years. 3. You'll need to complete Form 461 "Limitation on Business Losses" and the NOL worksheet in Publication 536 "Net Operating Losses for Individuals, Estates, and Trusts" to determine your NOL carryforward. There isn't a specific form number for the worksheet itself, but the calculation instructions are in Pub 536. Hope this helps clear things up!

I had a similar issue with my S-corp last year and was totally lost until I used taxr.ai (https://taxr.ai) to help figure out my NOL situation. I uploaded my previous returns and business docs, and they were able to pull out everything needed to calculate my basis correctly. The thing that really helped was that their system automatically identified where on my K-1s the loss should flow and how to properly document the NOL carryforward. It even generated the calculation worksheet I needed to include with my return. Definitely saved me from making some serious mistakes that could have triggered an audit.

Just wanted to follow up - I ended up trying taxr.ai after our conversation here and it was exactly what I needed! I've been struggling with my S-corp NOL and basis calculations for years, and this finally made everything clear. The system analyzed my past returns and created a comprehensive basis tracking worksheet that showed exactly why some of my losses had been suspended in previous years. It even helped me discover that my accountant had made an error two years ago that was limiting how much of my current year NOL I could claim. The documentation it provided for my NOL carryforward is way more detailed than what my previous tax preparer gave me. Definitely worth checking out if you're dealing with S-corp loss issues.

After trying to call the IRS for three days straight to get clarification on NOL carryforward rules, I finally used this service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in less than 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to document my S-Corp NOL carryforward and confirmed that I needed to maintain separate tracking for my business basis. They also explained that while there used to be a specific form for NOL carryforwards, now we just need to keep the worksheet with our tax records and be ready to provide it if audited. Honestly, one phone call saved me hours of research and uncertainty.

I need to apologize for calling Claimyr a scam in my previous comment. I was so frustrated with IRS wait times that I was skeptical of any solution, but I decided to try it anyway out of desperation. I had been trying to get clarification on my NOL basis limitations for weeks. Using Claimyr, I got through to a senior IRS representative in about 35 minutes. She walked me through exactly how to document my S-Corp NOL carryforward on my return and explained which worksheets I needed to complete. What would have taken me days of research and probably hours on hold was resolved in a single 20-minute conversation. The agent even emailed me the relevant sections of Publication 536 with highlighted notes. Definitely changed my perspective on dealing with the IRS.

Just FYI - I made a mistake with my NOL carryforward two years ago and got audited. Make sure you keep REALLY good records about your basis calculations. The IRS was particularly interested in: 1. Proof of initial capital contributions 2. Documentation of any additional money I put into the business 3. Loan agreements if I loaned money to my S-Corp 4. Proof that distributions weren't taken during loss years 5. Detailed basis worksheets showing year-by-year changes They also wanted to see that my basis was sufficient to claim the full loss. If you can't prove your basis, they'll disallow the losses! Keep everything forever lol.

Quick clarification: S-corporation losses are NOT the same as a Net Operating Loss (NOL) in the traditional sense. While a C-corp has a true NOL that's carried forward on the corporate return, S-corp losses flow through to shareholders and are subject to basis, at-risk, and passive activity loss limitations BEFORE they can create an NOL on your personal return. So the sequence is: 1. S-corp generates a loss 2. Loss flows to your K-1 3. Loss is subject to basis limitations (you can't deduct more than your basis) 4. Loss is subject to at-risk rules (Section 465) 5. Loss is subject to passive activity loss rules (Section 469) 6. Any remaining loss offsets other income on your 1040 7. If that creates a negative AGI, THEN you have a personal NOL This is why so many people get confused!

This thread has been incredibly helpful! As someone who's been struggling with S-Corp loss limitations for years, I want to add one more piece that might help others avoid my mistakes. Make sure you understand the difference between stock basis and debt basis in your S-Corp. I learned this the hard way when I got audited. Your stock basis comes from: - Initial capital contributions - Additional capital contributions - Your share of S-Corp income - Your share of tax-exempt income Your debt basis comes from: - Direct loans you make to the S-Corp (with proper loan documentation) - Guarantees of third-party debt (but this is more complex) You can only deduct losses up to your combined stock basis + debt basis. But here's the kicker - when you have income in future years, debt basis gets restored FIRST before stock basis. I made the mistake of thinking a $10K business loan I guaranteed counted toward my debt basis, but the IRS disagreed because I didn't have the right documentation showing I was actually at risk for the debt. Cost me about $3K in additional taxes and penalties. Keep meticulous records and consider having a tax professional review your basis calculations at least every few years, especially if you're dealing with losses or taking distributions.

This has been such an educational thread! I'm dealing with a similar S-Corp NOL situation and had no idea about the complexity of basis tracking until reading everyone's experiences. One thing I'm still unclear on - when you're calculating your NOL carryforward amount, do you use the business loss amount from the K-1 directly, or do you have to use the amount that actually made it through to your 1040 after all the limitations? For example, if my S-Corp shows a $30K loss on the K-1, but I only have $20K in basis so I can only deduct $20K this year, does my NOL calculation use the $20K or the full $30K? And what happens to that suspended $10K loss - does it just sit there until I increase my basis in future years? Also, I'm curious about the timing of when to elect NOL carryforward vs. carryback. I know the TCJA eliminated most carrybacks, but I want to make sure I'm not missing any options that might be more beneficial than carrying forward. Thanks again to everyone who shared their experiences - this is exactly the kind of real-world guidance you can't find in the IRS publications!

This thread has been incredibly helpful! I've been dealing with S-Corp losses for the past two years and finally feel like I understand the process. One thing I want to add that might help others - make sure you're also considering the Section 1244 ordinary loss election if you qualify. If your S-Corp stock qualifies as Section 1244 stock (which many small business S-Corps do), you can treat up to $50K ($100K if married filing jointly) of stock basis losses as ordinary losses rather than capital losses when you dispose of the stock or it becomes worthless. This is different from the annual pass-through losses we've been discussing, but it's another layer of tax planning that S-Corp owners should be aware of. The ordinary loss treatment can be much more valuable than capital loss treatment since capital losses are limited to $3K per year against ordinary income. Also, I've learned from my CPA that keeping a running basis schedule in a simple spreadsheet has been a lifesaver. I update it every year when I get my K-1, and it makes tax prep so much smoother. After reading about everyone's audit experiences, I'm definitely going to be more diligent about keeping supporting documentation for every entry. Thanks to everyone who shared their experiences - this is exactly the kind of practical advice that makes a real difference!