Carryback

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Carryback

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.

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.
References in periodicals archive ?
The bill's elimination of NOL carrybacks and limiting carryforward utilization to 80% of taxable income will be negative during the next downturn.
Businesses potentially subject to the CERT limitation should consider the impact of the CERT limitations on their NOL carrybacks on their FASB ASC Topic 740, Income Faxes, tax provision.
However, the IRS counters that 2010 had an unusually high number of NOL carrybacks because of a longer carryback period temporarily allowed by the American Recovery and Reinvestment Act, P.
In addition, AGI must be modified to include only NOL carrybacks or carryforwards that preceded the origination loss year (Treasury Regulations section 1.
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.
If an NOL, capital loss, or business credit carryback has instead been carried back on Form 1139, Corporation Application for Tentative Refund, Sec.
These include an extension of the research credit (for 2010 and 2011), longer carryback of the general business credit arising in 2010 for eligible small businesses, and several measures for enhanced expensing and depreciation of business property.
Under the transition rules, a taxpayer may revoke any election to waive the carryback period under IRC section 172(b)(3) with respect to an applicable NOL for a taxable year ending before November 6, 2009, before the extended due date for filing the return for the taxpayer's last taxable year beginning in 2009.
As Congress works to complete this important legislation, we ask consideration of these comments, specifically that provisions be added to the bill that would: (1) add a five-year, or at least a three-year carryback, of NOLs similar to previously passed legislation; and, (2) clarify that neither FICA or FUTA taxes, nor Federal income tax withholding, need be imposed upon either the exercise of an option or the disposition of the related stock.
One week later, Congress passed a bill, which President Bush is expected to sign, that provides greater net operating loss carrybacks for hurricane-affected businesses and that could provide cash refunds to offset a portion of storm restoration costs.
Tax adjustments involving net operating loss (NOL), capital loss, and credit carrybacks are deemed effective on the due date of the loss year (Secs.