Severe Summer Heat Causes Severe Concern for Contractors
The warmer-than-average winter temperatures, combined with the record summer heat, set the stage for some serious concerns for contractors. Many of them faced or are still facing water deficits, grueling working conditions, higher project costs, and net losses.
The unexpected costs many contractors incurred while battling the summer heat included, but were not limited to
- Hauling water onto job sites to keep the dry, cracking soil compacted
- Paying employees overtime for working overnight when temperatures were cooler
- Preventing concrete from setting too fast or cracking by cooling it with ice
The cooler weather, along with the rain, has fortunately brought some financial relief to many contractors in the Midwest region. However, with just a month left until the end of the year, it will be hard for many to make up those lost revenues. Contractors that will be reporting net losses on their 2012 tax returns should be aware of the net operating loss (NOL) rules that allow you to offset one year’s losses against another year’s income.
NOLs are usually carried back to offset prior years’ income and to claim a retroactive refund before they are carried forward against future years. Net operating losses may generally be carried back for two years before the year of the loss, which is called the NOL year. If the loss is carried back, it is used to offset the taxable income of previous years, with the earliest year offset first. If the loss is not fully used up in the carry back years, any unused portion of the loss may be carried forward for up to 20 years after the NOL year.
The rules surrounding net operating losses can be complicated and confusing. The facts of each case are unique, but utilizing the net operating loss rules appropriately may present a huge tax benefit for many businesses by offsetting other taxable income.