Net Operating Losses: Carry Back Or Forward?

Did your business report a loss for 2013? By now, you’ve already made the decision of whether to carry the loss forward to future years or back to a prior year. Here’s an overview of carrybacks and carryforwards.

  • Carryback. As a general rule, you can use your 2013 net operating loss to offset income earned in the preceding two years. The loss is carried back first to the earliest year, then forward. If the entire loss is not used during those two years, you can carry the remainder forward for 20 years.You can either amend your prior year returns or file a special form for a quick refund. In either case, you’ll receive interest if the IRS takes more than 45 days to process your request.
  • Carryforward. You have up to 20 years to use the net operating loss to offset future income.Note that the IRS assumes you will carry a net operating loss back in order to claim a refund. The assumption means that if you chose to carry your current year loss forward to future years, you had to attach an election statement to your 2013 tax return — and that election is irrevocable.

    What if you forgot to attach the carryforward election to your return? As long as you filed the return on time, you may be able to complete an amended return for 2013 and attach the election to it. To qualify for this relief, the amended return must be filed within six months of the due date of your return.

Do you have a question about your net operating loss? Please give us a call. We’re here to help.