Form 1045 Schedule A is used to compute a net operating loss (NOL) and determine the amount available for carryback or carryforward.
Those with a negative balance on Form 1040 line 41 may have a net operating loss. Form 1045 Schedule A allows you to determine the actual amount of your net operating loss.
These two numbers are different because certain deductions that are allowed on Form 1040 are not allowed in calculating a net operating loss.
A net operating loss can be deducted so that it reduces income in a previous or future year. A NOL must be carried back two years. If not used up in the previous 2 years, the NOL may be carried forward up to 20 years. Note, the 2 year carry back period may be waived.
If a NOL is carried back or carried forward, it will reduce that year’s income, thus reducing your tax liability for that year. When a NOL is carried back to reduce a previous year’s income, you will receive a refund from the IRS.