carryforward

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Carryforward

In accounting, a way for a company to reduce its tax liability by applying losses to future tax years in which the company makes a profit. That is, carryforward allows companies to apply losses to profits that have not yet occurred and thereby reduce the taxes they pay on those profits. Carryforward is limited to seven years. For example, suppose a company loses $500,000 in year one, then nets $1,000,000 in year five. The company may carry forward the losses and only be liable for taxes on $500,000 of its profit in year five.

Independent contractors who file Schedule C with the IRS are required to use carryforwards, which is useful since most independent contractors lose money in their first few years of business. Some publicly-traded companies opt not to use it, as appearing to reduce profits may scare off potential investors who do not realize that the profits upon which taxes are paid do not equal the company's actual profits.

carryforward

1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. Thus, a loss in one year would be carried forward to a future year and used to offset profits up to the amount of the carryforward. Carryforwards are especially useful to firms operating in cyclical industries such as transportation. Also called tax loss carryforward.
2. In taxation of individuals, net capital losses exceeding the annual limit of $3,000 that may be carried to succeeding years so as to offset capital gains or ordinary income. There is no limit on the amount of capital losses that may be used to offset capital gains in any one year, only on the amount of losses in excess of gains that may be used to offset income. Also called carryover.
References in periodicals archive ?
As a result of these net investment losses, the Company increased the valuation allowance against its deferred tax asset attributable to its net capital loss carry-forward during the first quarter of 2015 by $25.
At the same time, the $50,000 gain (longterm capital) allows T to take the $40,000 long-term capital loss carry-forward.
3 million due because of a tax loss carry-forward credit) in fiscal year 1991.
Reportable net income (which will include an approximate $800,000 net operating loss carry-forward adjustment) will be approximately $1,555,000, or $0.
The low tax provision for the 2005 period was the result of a tax loss carry-forward which was fully utilized during the fourth quarter.
6% largely due to the expiration of net operating loss carry-forward provisions.
Income Tax net operating loss carry-forward for the Company.
The low tax provision for the 2005 period had been reduced by a tax loss carry-forward, which was fully utilized during the fourth quarter.
In addition, the Company continues to hold a "soft asset" with its net loss carry-forward of approximately $5,500,000 which might, given a proper structure, be able to be meaningful to a profitable enterprise.
Further, the sale will allow Arlington to most effectively utilize its net operating loss carry-forwards and capital loss carry-forwards on a timely basis.
However, it is possible that a portion of the distributions will represent capital gains earned by the Fund but offset by capital loss carry-forwards, which will be taxable at ordinary income tax rates.
Though the Fund had net realized gains as of the end of October, 2006, these gains would be offset by tax loss carry-forwards for book purposes but not for tax purposes.