Net Operating Loss Carry-backs and Net Operating Loss Carry-Forwards

Net Operating Loss Carry-backs and Net Operating Loss Carry-Forwards

Tax law has long allowed individual taxpayers to carry back and to carry forward tax losses to offset reportable income in other years. Thus if a taxpayer has a business loss that is reflected on a return they can carry these losses either back for forwards thereby legally sheltering income and creating refunds that would otherwise not exist. Net Operating Losses (NOL) are opportunities for taxpayers who have paid taxes in one year to legally offset these monies against NOL's. Generally speaking a NOL is defined as the extent that allowable expense exceed deferred income and are carried back, by the taxpayer, two years or carried forward twenty years.

Claiming & Deducting a NOL Carryback

If you are individual taxpayer you can carry back your NOL, by using either Form 1045 or Form 1040X to claim your refund. You will get your refund faster by using Form 1045, but you have a shorter time to file it. You can use Form 1045 to apply an NOL to all carryback years. If you use Form 1040X, you must use a separate Form 1040X for each carryback year to which you apply the NOL.
Generally, you must file Form 1045 on or after the date you file your tax return for the NOL year, but not later than one year after the end of the NOL year. For example, if you are a calendar year taxpayer with a carryback from 2008 to 2006, you must file Form 1045 on or after the date you file your tax return for 2008, but no later than December 31, 2009

Claiming & Deducting a NOL Carryforward

If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the Other income line of Form 1040.

Corporate Taxpayers

Corporate Taxpayers (C Corporations) are also eligible to utilize the IRS's Carryback and Carryforward rules and can use Form 1139 which is a Corporate Application for Tentative Refund.

How To Claim an NOL Deduction

If you have not already carried the NOL to an earlier year, your NOL deduction is the total NOL. If you carried the NOL to an earlier year, your NOL deduction is the NOL minus the amount you used in the earlier year or years. NOL's when carried back to prior years should be applied to the oldest return first and then carried forward. Below you will find an example of a client letter when we applied IRS tax rules and regulations and carried a loss back to prior years receiving thousands in refunds the client did not know they could claim.

What Clients of John Dillard CPA Have to Say...

Mr. John Dillard, CPA

Dear John:
Here's the information we discussed. Will appreciate your taking a look at it and letting me know your recommendation.
John, I really appreciate the work you've done on my behalf. You literally saved me thousands of dollars by going back to the prior years and "carrying back" my current year taxes. You can be sure I won't forget that or hesitate to recommend you to others. I had been hoping to find a good accountant that I could trust and rely on to help me with my business and the Lord filled my need when he brought us together through the [Gwinnett] Chamber of Commerce.
Please let me know if I can be of any help to you or anyone you know with any Real Estate matters. As you know, I have been serving Gwinnett and surrounding counties with their Real Estate needs since 1972.
Thanks again!
Very truly yours,
Beverly
President

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/  (An Atlanta CPA firm) and for his latest book Overcoming Life's 9/11's: Job's Journey and to learn about his ministry visit http://www.john-dillard.com/