New changes in IRS regulations may provide your business with a refund if you can carry back your 2008 tax loss for five years

The IRS has just released information relative to changes in the net operating loss carryback for small businesses. Small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision in the American Recovery and Reinvestment Act to get a refund of taxes paid over the past five years instead of the usual two.

To accommodate the change in tax law, the IRS has updated the instructions for Form 1045 and Form 1139, which small businesses will use to take advantage of the carryback provision.

IRS Form 1045, Instructions

IRS Form 1139, Instructions

An IRS news release and question-and-answer document has more information on the net operating loss carryback provision (click here for link).

Revenue Procedure 2009-19 provides guidance under § 1211 of the American Recovery and Reinvestment Tax Act of 2009, that allows a taxpayer that is an eligible small business (ESB) to elect a 3, 4, or 5-year net operating loss (NOL) carryback for a taxable year ending after 2007, instead of the normal 2-year carryback. The revenue procedure tells taxpayers the time and manner for making the election if the taxpayer has not filed a return or has filed a return and either claimed the normal carryback or waived the carryback. The revenue procedure also provides guidance on how a taxpayer makes the election if the taxpayer is a partner of an ESB that is a partnership, a shareholder of an ESB that is an S corporation, or a sole proprietor.

Revenue Procedure 2009-19 will be in IRB 2009-14, dated April 6, 2009.

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