Managing NOL Loss Carry Forward on 1040 for S-Corp LLC - Need Help Understanding Forms
I've got a small photography LLC with S-Corp election that unfortunately ran at a Net Operating Loss (NOL) this past year. Equipment investments and slow bookings really hit us hard. My personal income for the year is actually below the standard deduction, so I don't owe anything there, but I'd really like to carry the business loss (NOL) forward on my 1040 to use in a future year when my business hopefully rebounds. I've been trying to figure this out myself but hitting roadblocks: 1. Is it correct that the NOL amount goes on line 21 on the 1040? That's what I think but not 100% sure. 2. Can I claim my entire NOL amount (my share after distribution through the S-Corp), or is there some maximum percentage I'm allowed to use? 3. I read somewhere that I need to show/calculate the NOL amount on some specific worksheet, but I can't find the right IRS form number for this anywhere... Thanks in advance for any help! This is my first year dealing with a business loss and I'm completely lost with the paperwork.
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Melina Haruko
The NOL (Net Operating Loss) rules can be confusing, especially with an S-Corporation election. Let me help clarify this for you! First, S-Corporation losses flow through to your personal tax return via Schedule K-1, then to Schedule E, and ultimately to your Form 1040. The losses aren't reported directly on line 21 of Form 1040 - they flow through these schedules first. For your S-Corp LLC, losses flow through to shareholders based on ownership percentage. So if you own 100% of the company, you get to claim 100% of the loss on your personal return. There's no percentage limitation, but there are other limitations based on your basis in the S-Corporation, at-risk rules, and passive activity loss rules. For the worksheet question - you're looking for Form 8582 (for passive activity losses) or possibly Form 461 (for excess business losses). You may also need to complete the NOL worksheets in Publication 536.
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Beatrice Marshall
•Thanks for the detailed explanation! I own 100% of the S-Corp so that part is straightforward. But I'm still confused about a couple things. So the loss doesn't go directly on line 21 of the 1040? It flows through the K-1 and Schedule E first? Also, I've never heard of Form 8582 or Form 461. Do I need to fill out BOTH of these forms? And how do I know which one applies to my situation? I'm actively involved in running my photography business every day, so I don't think it's a passive activity.
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Melina Haruko
•That's correct - the loss doesn't go directly on line 21. It flows from your K-1 to Schedule E, then to your 1040. The specific line numbers can change yearly with form revisions, but it's not directly entered on line 21. For the forms, since you're actively involved in your photography business, you likely don't need Form 8582 as that's specifically for passive activities. Form 461 would be relevant if your loss exceeds the threshold for excess business losses ($270,000 for single filers in 2023). The NOL worksheets in Publication 536 will help you calculate and track your NOL for carryforward purposes, which is what you'll need for future years.
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Dallas Villalobos
I had a similar situation with my consulting S-Corp last year and found taxr.ai super helpful for figuring out the NOL carryforward stuff. I was confused about all the forms and limitations too, especially with the tax law changes in recent years. Their system analyzed my previous returns and showed me exactly how to properly document my NOL for future use. Check them out at https://taxr.ai if you're stuck with the paperwork. They can analyze your specific situation and guide you through the correct forms and calculations.
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Reina Salazar
•Did this service actually help with calculating the basis limitations? That's what tripped me up with my S-Corp loss. I had a $32K loss but could only claim part of it because of my basis, and the calculations were a nightmare.
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Saanvi Krishnaswami
•I'm kinda skeptical about these online tax services. Can they really understand S-Corp NOLs better than an actual accountant? These are pretty complex rules that change all the time. Did they just give general advice or actually help with filling out the specific forms?
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Dallas Villalobos
•Yes, they actually helped me with the basis limitations calculation. Their system ran through my previous year returns to establish my beginning basis, tracked contributions and distributions, and calculated exactly how much of the loss I could claim. Made it super clear where my numbers needed to go. For your question about comparing to accountants - they don't replace accountants but supplement them. I uploaded my previous returns and business documents, and their AI system identified the specific NOL carryforward issues in my situation. They provided detailed guidance on completing Form 461 and the worksheets from Publication 536, with my actual numbers plugged in. Much more specific than general advice.
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Saanvi Krishnaswami
I was really skeptical about using taxr.ai for my NOL situation as mentioned above, but my accountant was booked solid and I needed answers fast. I'm honestly shocked at how helpful it was. I uploaded my S-Corp K-1 and previous returns, and within minutes got a detailed breakdown of my basis calculation, loss limitations, and exactly which forms I needed. The system even flagged that I had distribution issues affecting my basis that would limit my loss deduction - something I had no idea about. It generated all the worksheets I needed for tracking the NOL carryforward with my specific numbers already filled in. Definitely saved me from making some serious mistakes on my return this year.
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Demi Lagos
If you need more clarification directly from the IRS on NOL carryforwards, good luck actually getting through to them! I spent 4+ hours on hold trying to get answers about my S-Corp NOL documentation requirements. After two disconnected calls, I finally tried https://claimyr.com which got me connected to an IRS agent in about 20 minutes. They have this callback system that holds your place in line so you don't have to stay on hold forever. You can see how it works in their demo at https://youtu.be/_kiP6q8DX5c - totally changed my experience with getting IRS help.
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Mason Lopez
•How does that even work? I thought the IRS phone lines were just eternally busy. Does this service actually get you through faster somehow? I've got questions about business loss carryforwards too.
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Vera Visnjic
•Sounds like BS to me. The IRS doesn't let any service cut the line. They've got millions of people trying to call. I've tried everything and nothing works except calling right when they open. Even then I waited 90+ minutes last time.
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Demi Lagos
•It doesn't let you cut the line or anything magical like that. The service basically automates the calling and holding process. It uses software to continuously call the IRS until it gets through, then it monitors the hold music. When a real person finally answers, it calls you immediately so you can jump on the call. You're right to be skeptical - I was too. But the reality is the service just handles the painful holding part for you. I was able to get specific guidance on which worksheets to include with my return for NOL documentation, which solved my original problem. I don't work for them or anything, it just saved me hours of frustration when I really needed answers about my S-Corp NOL.
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Vera Visnjic
Ok I need to eat some crow here. After posting that skeptical comment above, I was still desperately trying to get through to the IRS about my restaurant's NOL carryforward documentation. Out of desperation, I tried the Claimyr service. Within 45 minutes, I got a call back and was connected to an actual IRS tax specialist who walked me through the entire NOL documentation process for my S-Corp. They confirmed I needed to include the worksheets from Publication 536 and gave me specific guidance about reporting my carryforward in future years. The agent even emailed me the exact pages I needed. I've been trying for WEEKS to get this information. I'm honestly shocked it worked.
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Jake Sinclair
Don't forget about the state tax implications of your NOL! Federal NOL rules don't always match state rules. I learned this the hard way with my S-Corp in California - thought I could carry everything forward the same way, but CA has their own system. Check your state tax guidelines too before finalizing everything.
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Beatrice Marshall
•That's a great point I hadn't even considered! I'm in Colorado - do you know if they follow federal rules for NOL carryforwards or have their own system? I should probably check this before filing. When I look at my state forms, they don't seem to specifically mention NOLs anywhere.
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Jake Sinclair
•Colorado generally follows federal tax treatment for NOLs, but with some modifications. They start with federal taxable income as the basis, so your NOL will flow through, but Colorado has their own adjustments. Colorado Form 104 includes your federal income as a starting point, so the NOL that reduces your federal income will indirectly affect your Colorado return. However, it's always good to check with the Colorado Department of Revenue website or their taxpayer service division to confirm the current year rules, as states sometimes change how they conform with federal tax changes.
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Brielle Johnson
Quick question for anyone who's dealt with this recently - I'm using TurboTax Business for my S-Corp and personal returns. Does it automatically handle the NOL carryforward worksheets and calculations between tax years? Or do I need to manually track this somewhere?
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Honorah King
•I used TurboTax last year for my S-Corp NOL and it mostly handled the calculations but didn't seem to create all the supporting worksheets automatically. I had to manually track some things and then input them again the following year. The software didn't seem to carry forward all the NOL details automatically between tax years. I'd recommend keeping your own separate tracking spreadsheet.
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Amara Chukwu
I'm dealing with a similar S-Corp NOL situation and wanted to add some practical tips from my experience last year. Make sure you have good documentation of your stock basis before claiming the loss - the IRS can challenge NOL deductions if you can't prove sufficient basis in your S-Corp stock. Keep detailed records of any loans you made to the company, capital contributions, and prior year income/losses. These all affect your basis calculation and determine how much of the NOL you can actually deduct. I had to reconstruct three years of basis calculations when the IRS questioned my NOL deduction. Also, consider whether the Section 199A QBI deduction might interact with your NOL situation in future profitable years. The interplay between NOLs and QBI can be complex, so it's worth understanding now while you're setting up your tracking systems. One more thing - if your photography business picks up significantly next year, be aware of the potential Section 461(l) excess business loss limitation. It caps business losses at $270,000 for single filers, with excess amounts treated as NOLs subject to the 80% limitation in future years.
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