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Business loss? Tax refund

Normally, if a business (except a C-corporation) has a loss that exceeds the owner's other income that year, the owners can "carry back" the loss and file amended tax returns for prior years. It is called a NOL - or net operating loss carryback. The loss reduces your taxable income for the prior year and then you recalculate the taxes due and request a refund for the difference between what you paid in a prior year and your revised tax. You must carry back the loss beginning 2 years before the loss occurred, and if you still haven't used up your NOL loss, you apply it to last year's income. If you still have loss, you can carry the remainder forward to offset future years' income (up to 20 years).

If your business loss was due to a Presidentially-designated federal disaster, you can take the NOL against your income 3 years ago, and then against your income 2 years ago, and then last year. This means that if you have a large loss, it is more likely that you can get refunds for past years rather than having to wait until future years revenue.

The forms to use are: IRS 1045 for "fast-turnaround" losses; otherwise 1040X. Both have the same results, but 1040X is processed slower. Contact the IRS at (800)429-4933 or your tax advisor for more information.