Figure and use your NOL in the following steps:

Step 1. Complete your tax return for the year. You may have an NOL if a negative figure appears on the line below:

• Individuals -- line 37 of Form 1040.
• Estates and trusts -- line 22 of Form 1041.

If the amount on that line is zero or more, stop here -- you do not have an NOL.

Step 2. Determine whether you have an NOL and its amount. See How To Figure an NOL, later. If you do not have an NOL, stop here.

Step 3. Decide whether to carry the NOL back to a past year or to choose to waive the carryback period and instead carry the NOL forward to a future year. See When To Use an NOL, later.

Step 4. Deduct the NOL in the carryback or carryforward year. See How To Claim an NOL Deduction, later. If your NOL deduction is equal to or smaller than your taxable income without the deduction, stop here -- you have used up your NOL.

Step 5. Determine the amount of your unused NOL. See How To Figure an NOL Carryover, later. Carry over the unused NOL to the next carryback or carryforward year and begin again at Step 4.

Note. If your NOL deduction includes more than one NOL amount, apply Step 5 separately to each NOL amount, starting with the amount from the earliest year.

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