Small Business Tax Net Operating Loss Election Clarified

The IRS has issued clarification on the election to carry back a small business tax net operating (NOL) loss 3, 4, or 5 years. In this case the IRS has taken the pro-taxpayer interpretation regarding which years’ revenues are used to determine whether the loss is a qualifying small business tax NOL. The election may be made by filing the applicable refund claim forms, by attaching a statement to the tax return for the year in which the small business tax NOL arose.

Longer Net Operating Loss Carry-Backs for Business Tax

The new tax law, the American Recovery and Reinvestment Act of 2009, allows small businesses that incur Net Operating Losses (NOL’s) in 2008 and later years to carry the loss back 2, 3, 4, or 5 years. Previously only a 2-year carry-back was allowed. For businesses that paid taxes in any of these years but incurred a loss in 2008, this carry-back can result in an immediate tax refund. The new rules apply to all small business tax returns, including S-Corporation tax returns, C-Corporation tax returns, Limited Liability Company (LLC) tax returns, partnership tax returns, and sole proprietorship / Schedule C tax returns. The rules also apply to losses from rental real estate.