Hall & Company CPAs Tax Law Trend Report Net Operating Loss ( NOL ) Tax Deduction

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As we head into the fourth quarter of 2009, Hall & Company, CPAs, Inc. in Irvine is apprising business clients about tax law breaks, including eligibility for the expanded Net Operating Loss (NOL) tax deductions, but time is of the essence.

As we head into the fourth quarter of 2009, Hall & Company, CPAs, Inc. in Irvine is apprising business clients about tax law breaks, including eligibility for the expanded Net Operating Loss (NOL) tax deductions, but time is of the essence.

Essentially, a net operating loss or NOL is generated when a business has more deductions than income. With the current economy, businesses should start analyzing whether they have failed to reduce operational costs swiftly enough to offset a drop in sales. If so, they may benefit from an NOL carry-back.

An excellent opportunity exists to turn your 2008 NOL into an accelerated tax refund from the IRS rather than waiting to claim it against future years' income.

Small businesses with deductions exceeding their income in 2008 can use a net operating loss tax law provision. The American Recovery and Reinvestment Act (ARRA) tax law provisions provide numerous ways to for businesses to get a refund of the taxes paid over the past five years. Under prior rules, a business that had an NOL could carry that loss back only two years for a refund of taxes paid in those earlier years. The business could also choose to carry the loss forward for up to 20 years.

The American Recovery and Reinvestment Act of 2009 tax laws changed the carry back period to as many as five years. The new tax law applies only to 2008 net operating losses in companies with average gross receipts over the last three years of $15 million or less. The five year eligibility period allows tax preparers to review prior years' income, where there may have been higher income and higher taxes associated with it.

This unlocks new tax planning opportunities for businesses which have had a large degree of income fluctuation in recent years. Prior to this Act, a business could only take advantage of two-years of carry-backs vs. the new five-year period. In addition, a business can still elect to skip the carry-back altogether and carry losses forward to reduce future taxes. There is an extended filing period for the carry-back election of September 15, 2009 for businesses or October 15, 2009 for individuals. Before making these or any tax decisions, a careful review of all the options is highly advisable.

Non-corporate taxpayers (including sole proprietors) may accelerate the refund by using Form 1045, Application for Tentative Refund. Corporations with NOLs may accelerate the refund by using Form 1139, Corporation Application for Tentative Refund. The IRS generally will issue a refund within 45 days, if not sooner. Forms 1045 and 1139 generally must be filed within one year after the end of the tax year of the NOL. These returns must be filed no later than December 31, 2009 for calendar year 2008 losses.

For information about these and other tax laws, interested parties should contact Hall & Company CPAs, Certified Public Accountants, Inc. at 949-910-HALL (4255), bh(at)hallcpas(dot)com or go to wwwhallcpas.com.

Hall & Company CPAs, Inc.
Based in Irvine, California, Hall & Company CPAs, Inc. is an accounting firm that advises its clients on matters ranging from the traditional accounting, financial statements and tax law compliance services to consulting advisory services. Hall & Company focuses on building business value in a wide array of industries.

About Bradford Hall, CPA
As the managing director of the Hall & Company, Bradford Hall is actively involved in all aspects of taxation and business planning. He has nearly 32 years of experience in public accounting. Hall's core strengths are in the areas of strategic tax planning for high-net-worth individuals, including corporate owners and executives, closely held corporations, partnerships, LLCs and trusts. He has significant experience negotiating corporate sales/merger, acquisitions and divisional spin-offs. In addition, Hall spends a great deal of time consulting in the area of business management, business succession planning, estate planning and preparation of comprehensive personal financial plans. He represents clients before the IRS, FTB and other taxing authorities.

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