Carryback

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Carryback

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Carryback

In accounting, a way for a company to reduce its tax liability by applying a net operating loss to previous years in which it made a profit. If a company deducts more than its net income in a given tax year, it may take the difference between the deduction and the net income (a negative number) and apply it as a deduction on taxable income for the previous five years. For example, if a company makes $1,000,000 in one year, and loses $500,000 the following year, it may only be liable for a $500,000 profit on the year it makes a profit. That is, it may receive a tax refund on part of what it paid for the profitable year. See also: Future Income Tax.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

carryback

A business operating loss that, for tax purposes, may be deducted for a certain number of prior years, usually no more than three. A business uses a carryback to recover taxes paid on income earned in prior years. For example, if a firm experiences a year of large losses following a period of profitable operations, it may use the losses to cancel out profits from preceding years on which taxes have been paid. When the taxes a company paid on profits are canceled because of a carryback, the firm is issued a refund by the Internal Revenue Service. Also called carryover, tax loss carryback.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
This rule will allow taxpayers to obtain greater tax benefits from Federal NOL carrybacks, due to the delay in recognition of the income attributable to state or local tax refunds.
Transitional rules are provided under each of the three penalty provisions for carrybacks to pre-1990 years.
1.1502-21, United Dominion creates uncertainty as to the appropriateness of the regulation's application when not determining separate-return-year carrybacks and carryovers.
The situation was complex due in part to a number of credit and loss carrybacks that affected the computations.
Under the TCJA, the NOL deduction for a tax year is equal to the lesser of (1) the aggregate of the NOL carryovers to such year, plus the NOL carrybacks to such year, or (2) 80% of taxable income (determined without regard to the deduction) (Sec.
The bill's elimination of NOL carrybacks and limiting carryforward utilization to 80% of taxable income will be negative during the next downturn.
Not all states allow NOL carrybacks. Some states adopt the provisions of Sec.
Believing that his business would improve markedly in 2010, John elected to forgo any carryback of this loss.
17, 2009, allowed an eligible small business (ESB) to elect to carryback an "applicable 2008 net operating loss" for three, four or five years.
Moreover, we support the proposal to allow carrybacks of business credits from taxable years ending in 2008 and 2009 (or at the election of the taxpayer, beginning in 2008 or 2009) to offset the entire net income tax liability.
Net operating loss (NOL) carrybacks and carryovers further complicate the calculation.
The Treasury Inspector General for Tax Administration (TIGTA) found that IRS delays in processing net operating loss (NOL) carrybacks result in the IRS's paying millions of dollars in interest unnecessarily.