net operating loss
Net operating loss carryback deadlines loom
Thursday, July 15th, 2010 | tax | No Comments
If your business suffered a net operating loss (NOL) in 2008 or 2009 (or a 2007 fiscal year), you may elect to carry back that loss up to 5 years and recover taxes previously paid. You must make the election on a timely filed return, including extensions. The deadline for electing the extended net operating loss carryback is September 15, 2010 for calendar-year corporations. It is October 15, 2010 for individuals. If you do not elect to apply the extended carryback, the original two-year carryback rule applies. In either case, any unused loss may be carried forward up to 20 years. Complicated enough yet? It gets worse - and better.
Here’s the better part: The original extended NOL carryback provision, part of the American Reinvestment and Recovery Act (ARRA) of 2009, applied only to an ‘eligible small business’ (under $15 million average gross receipts). The Worker, Home Ownership, and Business Assistance Act (WHOBA) of 2009 allows taxpayers of any size to make the election.
The other better part: The extended carryback election is generally available for only one of the tax years ending after 2007 and beginning before 2010. However, if you already made a timely election under the provisions of the ARRA, you may make an additional election for another year’s NOL under WHOBA. Even if you have already timely filed your 2009 return, you may be able to make the election before the extended deadlines.
The worse part: These rules are extremely complicated, so you need the help of a professional who is familiar with them.
By applying a net operating loss to profitable tax years, you can give your company a cash stimulus through a refund of previously paid taxes.
IRS gives some solace in a sad story
Friday, June 18th, 2010 | tax | No Comments
About five years ago, a police officer and his wife decided to use their retirement money to build their dream home in the Smokies. They bought a pretty lot and a log home kit, and contracted with a local builder to erect it. From the beginning, the construction process went terribly wrong. Errors compounded so much that they stopped work and had the unfinished house inspected. The inspection revealed that if the house was finished, it would be so unsafe that it would not receive a certificate of occupancy. The only solution would be to tear it down and start over, which the couple could not afford to do. It was a total loss.
They came to us for help. We calculated the casualty loss on the structure and reported it on their tax return, which created a net operating loss for the year. We took their story all the way to the appeals level, where the deduction was allowed. Having won that battle, we carried the net operating loss back to the years prior to the casualty loss. Last week, we received word that the carrybacks were allowed on appeal.
Our clients had to go back to work to make the mortgage payments on their shattered dream, but we were able to recover over $38,000 in taxes to help ease the pain of their experience. For all the horror stories you hear about the IRS, sometimes they do right by the taxpayer.