Sole Proprietors: NOL Carry Back Set to Expire Oct 15
October 15th 2009 is last day sole proprietors, certain individual partners in a partnerships, and certain shareholders of an S corporation, can take advantage of IRS Net Operating Loss (NOL) carry back incentive, for large losses in 2008. The incentive was introduced as part of the American Recovery and Reinvestment Act (ARRA) in February. There are efforts to extend tax benefit, as part of the proposed NOL Carryback Act, but self-employed entrepreneurs risk missing this opportunity by waiting.
What is a Net Operating Loss (NOL) carry back?
The NOL Carry back incentive allows eligible self-employed individuals the choice to carry back NOLs from tax years beginning or ending in 2008 for 3 to 5 years, rather than the standard 2 years. Small businesses can receive special tax refunds, which have the potential to be larger because the loss is spread over a larger span of years.
How does NOL Carryback help small business?
For small businesses that experienced steep losses in 2008, the NOL carry back can be beneficial because it can:
- offset loss against income earned, in up to 5 prior tax years
- result in refund of taxes paid up to 5 years ago
- avoid waiting to claim the loss on future tax returns by posting all or part of the loss now
How can you file for a NOL carry back?
Contact your tax advisor about how to claim a NOL carry back and consider completing IRS Form 1045, to accelerate any refunds.
- News Release: Election to expense certain depreciable business assets [PDF]
- 2008 Tax Tips: New Carry-Back Options for Net Operating Losses (FindLaw's Free Enterprise)
- Tax tip: Move fast on NOL carrybacks (Business Management Daily)
- Tax Incentives Expiring for Small Businesses (WebCPA)
- NRF urges Congress to pass NOL Carryback Act (National Jeweler)
- Recovery Act Reminders for 2009 (Journal of Accountancy)
- Sole Proprietorship Bankruptcy: What's at Stake (FindLaw's Free Enterprise)
- Choosing a Business Structure: the Sole Proprietorship (FindLaw's Free Enterpise)
- Tax Law FAQ (provided by Kundra & Associates Tax Attorneys)
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