In case you were wondering, there's still time to claim that 2008 net operating loss (NOL).

Thanks to a newly simplified procedure, if you operate an "eligible small business" or are a partner or shareholder in one, you might be able to benefit from the extended NOL carryback period enacted earlier this year.

Background.

Generally, when deductible business expenses exceed gross income during a year, you can use the loss to offset income reported on prior tax returns, subject to a two-year limit. Carrying the loss back nets you a refund of federal income tax paid during those preceding profitable years.

The stimulus bill changed the NOL carryback period for eligible small business losses occurring during 2008. For 2008 losses you can elect a two-, three-, four-, or five-year carryback. (You qualify as an eligible small business when average annual gross receipts for the past three years are less than $15 million.)

The hitch.

The election to use the extended carryback period has to be made on the return showing the loss - in other words, your 2008 income tax form. There's no problem if you haven't yet filed. You simply pick the most advantageous carryback period and attach the election to your completed return.

But if you have already filed, you may have inadvertently forgotten to include the election, a situation the IRS says is common.

The solution.

As long as you did not previously decide against carrying the loss back, you can elect the new, longer time period by filing either a tentative refund claim or an amended return for the prior years. The forms must be filed within six months of the due date of your 2008 return.

Example: Your sole proprietorship suffered a loss for 2008. You have until October 15, 2009, to file either a refund claim or a return amending the years to which you choose to carry the loss back.

Making the appropriate choice is vital to maximizing your benefit under the new rule. Please contact Jim Komos of Ciuni & Panichi at 216.831.7171 or jkomos@cp-advisors.com to discuss the most advantageous election for your business.

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