Does your real estate practice qualify as an “eligible small business” (ESB*) by the IRS? Have you had a net operating loss? If so, you might be in luck. The two-year carryback for net operating losses under the IRS has been temporarily extended by an additional three years. This means you can use the extended provision to offset and receive a refund of the taxes you paid on income earned up to five years ago.
For example, a business that had a net operating loss 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.
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.
* An ESB can be a sole proprietorship, partnership, or S corporation that has average annual gross receipts of $15 million or less during the 3-year period ending with the tax year of the NOL.
For more information check out the IRS Q&A Sheet for more details and more helpful links: