It depends on the type of loss.
If you have what the IRS
deems a net operating loss, it can be carried back 2 years and then forward 5.
To carry it back you either use an amended tax return
You can also elect NOT to carried it back at all, but rather to carry it forward for 20 years.
Here's the IRS website that gives you the guidelines:
And here's an example they give, to help you calculate:
Martha Sanders is a self-employed contractor. Martha's 2011 deductions
are more than her 2011 income
because of a business loss. She uses Form 1045 to carry back her NOL 2 years and claim an NOL deduction
in 2009. Her filing
status in both years was single. See the filled-in Form 1045 later.
Martha figures her 2011 NOL on Form 1045, Schedule A
(not shown). (For an example using Form 1045, Schedule A, see Illustrated Form 1045, Schedule A under How To Figure an NOL , earlier.) She enters the $10,000 NOL from Form 1045, Schedule A, line 25, on Form 1045, line 1a.
Martha completes lines 10 through 25, using the “Before carryback” column under the column for the second preceding tax
year ended 12/31/09 on page 1 of Form 1045 using the following amounts from her 2009 return
2009 Adjusted gross income
: Medical expenses
[$6,000 − ($50,000 × 7.5%)] $2,250 State
income tax + 2,000 Real estate tax
Home mortgage interest
Total itemized deductions $13,250
Income tax $4,544Self-employment
Martha refigures her taxable income
for 2009 after carrying back her 2011 NOL as follows:
2009 Adjusted gross income $50,000
NOL from 2011 −10,000
2009 Adjusted gross income after carryback $40,000
[$6,000 − ($40,000 × 7.5%)] $3,000
State income tax + 2,000
Real estate tax + 4,000
Home mortgage interest + 5,000
Total itemized deductions −14,000
Exemption − 3,650
2009 Taxable income after carryback $22,350
Hope this helps.
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