Turn your business loss into a tax gain!
If during the income tax return filing year, you found that your business had a net operating loss for the year, the news at tax time won’t be all bad. Even though nobody enjoys being unprofitable, a net operating loss does have an upside – it can generate tax benefits for your company.
In a nutshell, a net operating loss occurs when a company’s deductible expenses exceed its income. But of course the specific rules are more complex.
When a business incurs a qualifying net operating loss, there are a number of options. Here are two of them:
- Carry the loss back up to two years, and then carry any remaining amount forward up to 20 years. The carryback can generate an immediate tax refund, boosting cash flow immediately.
- Elect to carry the entire loss forward. If cash flow is fairly strong, carrying the loss forward may be much more beneficial. After all, it will offset income for up to 20 years. Doing so may be especially savvy when business income is expected to increase substantially over the years.
In the case of flow-through entities, owners might be able to reap individual tax benefits from the net operating loss.
If you have questions about the net operating loss rules or would like assistance in determining how to make the most of a net operating loss, Ciuni & Panichi can help you start planning now. For more information, or on tax reporting requirements, please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com.
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