Consecutive NOL years

[jhlee_99]

I had a NOL in 2018. I used Form 536, worksheets 1 and 3 to calculate the carryover amount to 2019.  In 2019, I incurred another NOL (excluding the 2018 carryover NOL) and calculated the carryover amount to 2020 using same worksheets.  I thought we must use the earliest NOL first. Using the form 536 instructions/worksheets, all of the 2018 NOL carried over to 2019 will not be used at all.  Instead, the losses of 2019 will be applied toward non-business income and any leftover carryover to 2020.  So, the entire 2018 NOL is carried to 2020 and $0 is applied to 2019 income.  Is this right?  

[ThomasM125]

The net operating loss from the previous year would appear as "Other Income" on the current year tax return. If you had losses in the current year, they would also appear on the tax return, which could result in a loss larger than the NOL from the previous year to be carried over to the next year.

One NOL is the same as another, so I'm not sure why it would matter which one was applied to the current year first, since both of them will be a component of the current year net loss, which will then be carried over to the next year.

[jhlee_99]

Thanks for the reply Thomas.  I copied your response I received from you in an email notification in response to my question below.  That was the answer looking for.

The reason I need to care of about how much 2018 NOL was applied to 2019 tax filing is because in 2020, I will need to include a statement describing how much NOL was carried forward from which tax year.

This would be correct. The business losses in the current period would be netted against non-business income to determine the current year net operating loss (NOL.) Only after you did that would the NOL from the previous year be applied to the current year. Since the current year has no net income, the NOL from the previous year would then be applied to the next year.