Carryback

(redirected from Loss Carrybacks)
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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 rule eliminating loss carrybacks applies to losses arising in 2018 and later years.
This $2,000 would then be eliminated by the administrative loss carryback.
Indeed, the language of the proposed regulations might even be interpreted as denying a current deduction for a payment of state income tax on the ground the payment is contingent because the taxpayer may ultimately receive a refund of all or part of one year's tax by reason of net operating loss carrybacks.
179 deduction, net operating loss carrybacks or carryforwards and the Sec.
It's also important for the lawyer and CPA to address the collection issue, checking for statutes of limitations on refunds, credits, net operating loss carrybacks and so forth.
The situation was complex due in part to a number of credit and loss carrybacks that affected the computations.
A corporation cannot include net operating losses (NOLs) or capital loss carrybacks or carryovers when computing its taxable income.
For background information, see Tax Clinic, "Hotel Chain Entitled to $22 Million in Specified Loss Carrybacks," TTA, January 2001, p.