Q We lost money in our business this year, but we made money and paid some high taxes the last couple of years. We heard about using our 2009 loss to get a refund of prior year taxes. How does that work?
A Most businesses may use losses incurred during the economic downturn to reduce income from prior tax years, under a revenue procedure issued by the Internal Revenue Service.
The relief provided under the Worker, Homeownership, and Business Assistance Act of 2009 differs from similar relief issued earlier this year in that the previous relief was limited to small businesses. The current relief is applicable to any taxpayer with business losses, except those that received payments under the Troubled Asset Relief Program.
Taxpayers under the procedure may elect to carry back a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. An NOL or loss from operations carried back five years may offset no more than 50 percent of a taxpayer's taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year.
The procedure applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after Dec. 31, 2007, and beginning before Jan. 1, 2010.
To find out more, please email me privately with the details of your situation.
