Daily Tax Update - August 14, 2009

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL CONGRESS RETURNS FROM ITS AUGUST RECESS ON SEPTEMBER 8TH.

IRS REMINDS SMALL BUSINESSES ABOUT NOL CARRYBACK DEADLINE: The IRS reminded small businesses that the deadline for taking advantage of the expanded business loss carryback option is approaching. Eligible individuals have until October 15 to choose this expanded carryback option while eligible calendar-year corporations have until September 15.

  • According to the IRS, “Under the American Recovery and Reinvestment Act (ARRA), enacted in February, many small businesses that had expenses exceeding their income for 2008 can choose to carry the resulting loss back for up to five years, instead of the usual two. This means that a business that had a net operating loss (NOL) in 2008 could carry that loss as far back as tax-year 2003, rather than the usual 2006. Not only could this mean a special tax refund, but the refund could be larger, because the loss is being spread over as many as five tax years, rather than just two.”
  • The IRS said that this option may be particularly helpful to any eligible small business with a large loss in 2008. A small business that chooses this option can benefit by:
    • Offsetting the loss against income earned in up to five prior tax years,
    • Getting a refund of taxes paid up to five years ago,
    • Using up part or all of the loss now, rather than waiting to claim it on future tax returns.
  • The IRS added, “Under ARRA, eligible taxpayers can choose to carry back a NOL arising in a taxable year beginning or ending in 2008 for three, four or five years instead of two. The option is available for an eligible small business (ESB) that has no more than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. This choice may be made for only one tax year.”
  • Additional information can be accessed here.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Revenue Ruling 2009-27, announcing the rates of interest, will appear in Internal Revenue Bulletin 2009-39, dated Sept. 28, 2009. The revenue ruling can be accessed here.  

STEPTOE & JOHNSON LLP - TAX PRACTICE
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