Small businesses may be entitled to refunds

The federal economic stimulus package includes a change that could mean refunds for some small businesses. Under the new law, a small business that reports a federal taxable loss on its 2008 tax return may elect to carry the loss back 5 years to get a refund of taxes paid in the prior year(s). The new rule will benefit a business:

• That reports a net operating loss for 2008,
• Whose average gross receipts were less than $15 million for the three-years ending with the year of the loss, and
• That paid federal income tax in one or more of the 5 previous years.

From the IRS news release:

"The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. " 'The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,' said IRS Commissioner Doug Shulman. 'We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.' " We will communicate with any clients who are eligible for refunds under the new rule.