March 17, 2009 – The Internal Revenue Service has announced that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.
To accommodate the change in tax law, the IRS updated the instructions for two key forms — Form 1045 and Form 1139 — that small businesses can use to make use of the special carryback provision for tax year 2008. These forms are used to accelerate the payment of refunds.
The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. The IRS released legal guidance in Revenue Procedure 2009-19 outlining specific details. Some taxpayers must make the election to use this special carryback by April 17, 2009.
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