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Face limits on net operating loss carrybacks

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in Small Business Tax

Q. My calendar-year business incurred a loss in 2010. Can it be carried back to offset 2005 income? J.B.J., Boston  

A. No. Normally, a net operating loss (NOL) can be carried back for two years and then forward for up to 20 years, until the loss is exhausted.

However, a special five-year NOL carryback period was approved for certain small businesses for tax years beginning in 2008 and then extended to all businesses for tax years beginning in 2009.

But the new 2010 Tax Relief Act didn’t include any further extension on NOLs for tax years beginning in 2010 and beyond.

Therefore, you’re limited to a two-year carryback period for a 2010 NOL.

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