carryforward

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Related to carry-forward: Carry Forward Losses

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 ?
Unlike the net operating loss carry-forward and the capital loss carry-forward, the alternative minimum tax credit does not have to be multiplied by the effective tax rate.
People who should take advantage of carry-forward tax relief are those who have disposable cash that can be locked away in a pension fund and who have not previously been paying up to the maximum on their personal pension.
For further information on carry-forward pension relief, contact 01633 221122
This is a very satisfactory result, produced through both new and carry-forward revenues, in what is historically not a strong quarter for Intec," said Intec's Executive Chairman, Mike Frayne.
Further, given the tax loss carry-forwards, the income of the depository institution would be sheltered from taxes for an extended period of time.
Class A costs also included $66,492 in interest charges related to the Class A cost carry-forward.
The Company expects that its net operating loss carry-forwards (NOLs) will allow most of its profits and cash to drop to the bottom line.
Because the Fund has substantial capital loss carry-forwards from losses, it is not likely that there will be long-term capital gains to distribute for some time - at least until the capital loss carry-forwards are exhausted.
The Fund has substantial capital loss carry-forwards from prior years and does not expect to generate net capital gains in 2006 that would exceed these capital loss carry-forwards.
The Company also presently expects that it will be able to utilize its 2004 tax attributes (capital loss carry-forwards and net operating loss carry-forwards) and anticipated 2005 losses to offset any federal or state tax gain that would be recognized on the sale of PeterStar.
At December 31, 2003, The Company had net operating loss carry-forwards of $247,775 that may be offset against future taxable income through 2023.
Subsequent to the Rights Offering, the Company determined that the use of certain of its tax attributes, including its net operating loss carry-forwards (which, as of December 31, 2002, were approximately $44,000,000), may have been substantially restricted as a result of the consummation of certain transactions in the Rights Offering.