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Tax refund for net operating losses available now

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Losing money is not cause for rejoicing, but the Internal Revenue Service (IRS) has made losing money easier to take. The IRS 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. The agency expects a record number of businesses to take advantage of this provision.

Small businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.

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 today in Revenue Procedure 2009-19, which outlines details. Some taxpayers must make the election to use this special carryback by April 17, 2009.

To qualify for the new five-year carryback provision, a small business must have no greater than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years.

A list of questions and answers has been posted on the IRS Web site. Small businesses that file Form 1040 can also call 800-829-1040 with NOL questions. Corporations can contact 1-800-829-4933 with NOL questions.
Source: U.S. Small Business Administration, www.sba.gov


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