Experiencing Losses? You Aren’t the Only One.
Due to the current state of the economy, many businesses that had always enjoyed being profitable are now finding themselves operating in the red. If you find yourself in that same spot, there may be some relief.
Individuals who have paid taxes in the last five years and are experiencing significant losses from business operations or flow-through entities may be entitled to significant tax refunds. Current year losses may result in a net operating loss (NOL), which is available to offset income generated in prior years.
An NOL may be carried back two years or carried forward 20 years to offset income in those tax years. For the 2008 and 2009 tax years, the Worker, Homeownership and Business Assistance Act of 2009 allows the taxpayer to elect to carry the NOL back either three, four or five years.
In order to carryback an NOL, you can file Form 1045 before the end of the year following the loss. The benefit of filing Form 1045 is that you will receive your refund within 90 days after filing or within 90 days of the due date of the return for the year in which the loss was incurred. This can be very beneficial for individuals who need cash quickly following a year with limited cash flow.
Corporations may also be eligible to receive a quick refund for taxes paid in prior years. Consult your tax advisor for more information.