The Internal Revenue Service recently announced that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.
This new provision, found in the 2009 Recovery Act, provides relief for small businesses by extending the maximum carryback period for net operating losses (NOLs) from two years to five years. This treatment is temporary and only applies to NOLs for a tax year beginning or ending in 2008. Immediate refunds are available to businesses that qualify.
An eligible small business is one which has had average gross receipts not exceeding $15 million for the three-year period ending with the loss year. The gross receipts test applies at a partnership, corporate, or sole proprietorship level.
If eligible, the carryback applies to a corporation, a partner of a partnership, a shareholder of an S corporation, or a sole proprietor who reported a loss on a Schedule C of their 1040. A taxpayer can include NOLs from more than one partnership, S corporation or sole proprietorship, providing the gross receipts test is met by the aggregated gross receipts.
Partners, S-corp shareholders and sole proprietorships may accelerate a refund by using Form 1045 Application for Tentative Refund. Corporations may accelerate their refund by using Form 1139 Corporate Application for Tentative Refund.
This new tax provision, coupled with the 2009 50% Bonus Depreciation rules for acquisitions/improvements to aircraft and certain other business assets, requires immediate planning and projections to ensure you’re maximizing the tax benefits associated with these new rules, according to officials at Wolcott & Associates, a certified accounting firm that serves the aviation industry.
For more information: Aviation-CPA.com