RMC No. 81-2026: How to Claim 2020-2021 NOLCO That eBIRForms and eFPS Won't Accept

RMC No. 81-2026, issued by the BIR on July 24, 2026, gives taxpayers a manual workaround for declaring Net Operating Loss Carry-Over from taxable years 2020 and 2021 on BIR Forms 1701, 1702-RT, and 1702-MX. It exists because the Offline eBIRForms Package and eFPS only validate a three-year NOLCO schedule, while pandemic-era losses from 2020 and 2021 get a five-year carry-over under RA 11494.

What is NOLCO and why do 2020-2021 losses get a longer carry-over? #

Net Operating Loss Carry-Over (NOLCO) is the excess of a business’s allowable deductions over its gross income in a taxable year, which the National Internal Revenue Code normally lets a taxpayer deduct from taxable income for the next three consecutive years. Under Republic Act No. 11494 (the Bayanihan to Recover as One Act, or “Bayanihan II”), losses incurred specifically in taxable years 2020 and 2021 instead get a five-year carry-over — a pandemic-relief exception implemented by Revenue Regulations No. 25-2020.

RR No. 25-2020 spells out the extended window for exactly those two loss years:

The net operating loss of the business or enterprise for taxable years 2020 and 2021 shall be carried over as a deduction from gross income for the next five (5) consecutive taxable years immediately following the year of such loss.

That means a corporation with an unused 2020 NOLCO balance can still deduct it as late as its taxable year 2025 return, and a 2021 balance can still be used as late as taxable year 2026 — well past the point where the standard three-year rule would have already closed the window.

Why won’t eBIRForms and eFPS accept your 2020 or 2021 NOLCO? #

The Offline eBIRForms Package and eFPS were both built with a NOLCO schedule that only has fields for losses incurred in the three taxable years immediately preceding the return, matching the regular NIRC carry-over rule. Neither system was ever updated with a field structured for the five-year window RA 11494 created, so entering an old 2020 or 2021 loss into the normal schedule either gets rejected by the system’s built-in validation or, worse, gets silently misstated.

By the time a calendar-year taxpayer files its taxable year 2024 or 2025 annual income tax return, a 2020 loss is already four or five years old — outside the three-year lookback the software checks against (which, for a 2025 return, only covers 2022 through 2024). A 2021 loss faces the same problem a year later. Practically, this means:

• The native NOLCO schedule in eBIRForms/eFPS has no column that corresponds to a 2020 or 2021 loss year on a 2024 or later return
• Taxpayers who try to force the entry into the wrong column risk a validation error or a mismatched Schedule of Net Operating Loss Carry-Over
• Without a workaround, a legitimate, still-usable NOLCO balance from the pandemic years effectively becomes unclaimable through the standard filing path

RMC No. 81-2026 exists specifically to close that gap without requiring a system rebuild.

How does the RMC No. 81-2026 workaround work? #

The workaround splits the NOLCO claim into two parts: whatever the standard three-year schedule already accepts, and a manual override for the rest, entered through the Special Allowable Itemized Deductions section with a specific citation written into the description field. Follow these steps when preparing BIR Form 1701, 1702-RT, or 1702-MX:

1. Complete the regular NOLCO schedule first. Enter any NOLCO from the three taxable years the built-in schedule already recognizes, exactly as you normally would.
2. Identify the remaining 2020 or 2021 balance the schedule can’t hold. This is the portion of your five-year NOLCO that falls outside the system’s three-year window.
3. Add a line item under Special Allowable Itemized Deductions. Use this section — not the NOLCO schedule — to enter the leftover 2020 or 2021 balance as a peso amount.
4. Write the specific NOLCO year and legal basis in the description field. RMC No. 81-2026 requires the entry to explicitly state the loss year (2020 or 2021) and cite RA No. 11494 as the legal basis for the extended carry-over — for example, “2020 NOLCO under RA 11494 (Bayanihan II), RMC No. 81-2026.”
5. Double-check the total against the deduction limit. The BIR has reminded taxpayers that the combined NOLCO claimed — regular schedule plus the override entry — must not exceed net income before NOLCO for that taxable year.
6. File through your normal channel. Once the override entry is in place, submit the return through eBIRForms or eFPS as usual; the workaround does not change how or where the return is filed.

Which forms and fields are involved? #

RMC No. 81-2026 applies to the three annual income tax return forms that carry a NOLCO schedule and a Special Allowable Itemized Deductions section: BIR Form 1701 (individuals in business/practice of profession), 1702-RT (corporations subject to the regular corporate income tax rate), and 1702-MX (corporations with mixed income subject to multiple tax rates/special rates).

In every case, the regular NOLCO schedule stays reserved for losses the system already recognizes; the 2020/2021 override always routes through Special Allowable Itemized Deductions with the description-field citation described above.

Worked example: claiming a 2020 NOLCO balance in its final year #

XYZ Trading Corp. (a fictional calendar-year domestic corporation) recorded a ₱500,000 net operating loss for taxable year 2020 during pandemic lockdowns and had no taxable income against which to apply it in 2021 through 2024. Taxable year 2025 — reported on the annual ITR filed in April 2026 — is the last of the five consecutive years RA 11494 allows for that 2020 loss, so the full balance has to be claimed now or it expires unused.

For TY2025, XYZ Trading Corp. reports gross income of ₱2,000,000 and regular allowable itemized deductions of ₱1,200,000, leaving net income before NOLCO of ₱800,000. Because the 2020 loss is five years old relative to TY2025, the eBIRForms/eFPS native NOLCO schedule (which only covers TY2022–TY2024) has no field for it, so the ₱500,000 balance is claimed through the RMC No. 81-2026 workaround:

The ₱500,000 override entry does not exceed the ₱800,000 net income before NOLCO, so the full remaining balance is validly absorbed in this final year, and the description field carries the exact citation RMC No. 81-2026 requires — the loss year and RA 11494 as legal basis — so the entry is traceable back to its statutory source even though it never touches the system’s built-in NOLCO grid.

What if my fiscal year doesn’t line up with the standard window? #

The five-year carry-over only applies within a defined date range, so a business whose fiscal year falls outside that range stays on the regular three-year rule even for a 2020 or 2021 loss. The BIR has clarified that businesses with fiscal years ending before July 31, 2020, or after June 30, 2022, cannot avail of the extra two years — meaning the extended carry-over is tied to the specific pandemic period the law addressed, not to every taxpayer labeled “2020” or “2021” by calendar convention.

Before applying the RMC No. 81-2026 workaround, confirm that your loss year actually falls within the qualifying fiscal-year range; if it doesn’t, the loss belongs in the regular three-year NOLCO schedule instead, and the Special Allowable Itemized Deductions override should not be used for it.

Frequently asked questions #

What is RMC No. 81-2026? #

RMC No. 81-2026, issued by BIR Commissioner Charlito Martin R. Mendoza on July 24, 2026, prescribes interim workaround procedures for claiming the five-year Net Operating Loss Carry-Over incurred in taxable years 2020 and 2021 on BIR Forms 1701, 1702-RT, and 1702-MX, because the Offline eBIRForms Package and eFPS only validate the standard three-year NOLCO schedule.

Why can’t eBIRForms or eFPS handle 2020 and 2021 NOLCO normally? #

The built-in NOLCO schedule in both systems only has fields for losses incurred in the three taxable years immediately before the return being filed, matching the regular NIRC rule. It has no field structured for the five-year carry-over that RA 11494 (Bayanihan to Recover as One Act) granted specifically to losses incurred in 2020 and 2021, so a return with those older losses either gets rejected or fails to reflect the correct amount.

How do I claim old 2020 or 2021 NOLCO under the RMC No. 81-2026 workaround? #

First enter as much of the loss as the standard three-year NOLCO schedule already accepts. For any remaining balance the schedule can’t hold, add a line item under Special Allowable Itemized Deductions, write the specific loss year and RA 11494 as the legal basis in the description field, and enter the peso amount there instead.

Is there a deadline for using 2020 or 2021 NOLCO? #

Yes. Under RA 11494 and RR No. 25-2020, the loss must be fully applied within the five consecutive taxable years immediately following the year it was incurred — 2020 NOLCO must be used by taxable year 2025, and 2021 NOLCO by taxable year 2026. Any unapplied balance after that window simply expires.

Does the five-year NOLCO rule apply to every business regardless of fiscal year? #

No. The BIR has clarified that the extra two years apply strictly within defined dates — businesses with fiscal years ending before July 31, 2020, or after June 30, 2022, cannot avail of the extended five-year carry-over for those particular loss years and remain on the regular three-year rule.

Can I combine the regular NOLCO schedule and the Special Allowable Itemized Deductions override on the same return? #

Yes. A return can show a regular three-year NOLCO entry from a more recent loss year and, separately, a Special Allowable Itemized Deductions line for an older 2020 or 2021 balance, as long as the combined NOLCO claimed does not exceed net income before NOLCO for that taxable year.

Summary #

RMC No. 81-2026 doesn’t change how much NOLCO a taxpayer is entitled to claim — RA 11494 already fixed that at five years for 2020 and 2021 losses — it changes how that claim gets entered on a system that was never updated to hold it. Enter what the native NOLCO schedule accepts, route the rest through Special Allowable Itemized Deductions with the loss year and RA 11494 spelled out in the description field, and keep the combined total within net income before NOLCO. For 2020 losses, taxable year 2025 is the last chance to use the balance before it expires, so this is not a workaround to defer. If you’re still assembling the return itself, see our guide on downloading and filing through the BIR eBIRForms Offline Package, and if a NOLCO entry needs to be corrected on a return you already filed, how to amend a filed BIR tax return covers the three-year amendment window and its cutoff. For the full library of BIR compliance guides, browse our latest posts.