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 ?
MIC expects taxable gain from the sale of BEC to utilize the majority of its federal prior year Net Operating Loss carry-forward although the company expects to be able to offset future federal taxable income with the tax benefits associated with planned growth capital deployments.
"However, we still expect our annual cash income taxes to be in a range of $10 million to $20 million, as we continue to be able to utilize our $3 J billion federal tax net operating loss carry-forward to offset taxes that are currently available."
There is also a loss carry-forward tax credit, the Carried-Forward Annual Loss Credit, AS 43.55.023(b), that allows companies to write off 25 percent of capital investments incurred while exploring or developing an oil and gas find before production starts and income is received.
The analysis of strong growth potential is partly based on the value of AIG's operating loss carry-forwards. The analysis projects the potential net present value of AIG's loss carry-forward to a conservative project of $11.5 billion, or $8.28 a share.
Capital losses can be carried forward five years to offset future capital gains and back three years to offset prior capital gains for all corporations, Again, in order to determine the amount of the deferred tax asset, you must multiply your capital loss carry-forward by the effective tax rate and then compute how much of the asset may be admitted.
* Support efforts to improve net operating loss carry-forward provisions
The company reported pretax income of $519,681, upon which it accrued income taxes of $200,597, which the company did not have to actually pay because of a net operating loss carry-forward.
The final entity (FirstCity Financial Corp.) was a publicly traded company with $40 million in equity and a net operating loss carry-forward in excess of $595 million.
In 1997, HPI recorded a nominal tax provision due to the utilization of its net operating loss carry-forward.
Net income, which was negative for most of the 1980s, blossomed to $3.2 million ($1.3 million due because of a tax loss carry-forward credit) in fiscal year 1991.
NORDIC BUSINESS REPORT-20 December 2004-Swedish tax board approves SEK605m tax loss carry-forward for NCC(C)1994-2004 M2 COMMUNICATIONS LTD http://www.m2.com
Duane Reade executives anticipate that the company will begin this year to apply the net tax loss carry-forward benefits it had accumulated in past years.