Essentially, a net operating loss or NOL is generated when a business has more deductions than income.
Under prior rules, a business that had an NOL could carry that loss back only two years for a refund of taxes paid in those earlier years. (The business could also choose to carry the loss forward for up to 20 years.)
The “American Recovery and Reinvestment Act of 2009″ changed the carryback period to as many as five years. The new rule applies only to 2008 net operating losses in companies with average gross receipts over the last three years of $15 million or less.
* Planning opportunities
The carry back periods of three, four, or five years are elective. That means that the taxpayer can choose how long to carry back the NOL as long as it doesn’t exceed five years.
This opens up many tax planning opportunities, especially if taxable income has fluctuated significantly over the years. Not only that, it’s a terrific benefit to taxpayers with NOLs larger than could be absorbed over the traditional two-year period.
As an alternative to carrying the loss back to prior years, you can still elect to forgo the carryback altogether and simply carry your losses forward to reduce future taxes.
Remember that the new NOL rules are elective, and you may choose to carry losses back as you see fit for up to five years.
There are filing and time restrictions on this tax break for businesses, so contact us if you need details and filing assistance.
What’s New in Finances
“Do Not Call” doesn’t prevent scammers
Registering with the National Do Not Call Registry is supposed to keep you from getting all those annoying mass marketing phone solicitations.
It appears that the current recession has brought out scam artists hungry for revenue and unconcerned about the illegality of their sales pitches. During the first quarter of this year, the Federal Trade Commission received 450,000 complaints from those who signed up with the Do Not Call Registry, but who are still receiving unwanted calls.
Among the scams currently being pitched: extended auto warranties, swine flu cures, debt renegotiation plans, and free lunch seminars promoting “low-risk” investments.
Be aware that the scammers are especially active right now, and be very skeptical of offers and promotions made by phone or e-mail.
How to deal with finances after a spouse’s death
The death of a spouse can leave the survivor with a bewildering array of financial problems. In many families, one partner handles all the financial matters. If that partner passes away first, without having discussed and documented the couple’s financial affairs, the survivor may face a steep learning curve or make poor financial decisions out of ignorance.
In many cases, the surviving spouse will be the wife. In fact, recent studies indicate that seven out of ten baby boomer wives will outlive their husbands. So getting a handle on the family’s financial affairs is especially important for women.
If you’re dealing with the death of a spouse, here are a few guidelines to help you navigate.
* Locate important documents. These include wills, insurance policies, deeds, investment certificates, powers of attorney, birth and marriage certificates, bank statements, and vehicle titles. You’ll need these documents to change beneficiaries, revise asset titles, and verify account balances.
* Keep paying bills. Don’t risk losing your good credit by neglecting ongoing expenses.
* Check survivor benefits. Contact the Social Security Administration to learn about survivor benefits. Also call your spouse’s former employer to find out about employee benefits, such as payouts of unpaid salary, unused vacation, and pensions.
* Decide how you’ll handle life insurance proceeds. Benefits may be paid in a lump sum or an annuity. If you take proceeds in a lump sum, you’ll want to place them at least temporarily in readily available investments, such as money market accounts. Survivors often live on insurance proceeds for many years, so think twice before using the insurance money to remodel the house, pay off the mortgage, or take an expensive vacation.
* Get competent legal and financial advice. Seek out qualified and trusted professionals to help you through the process of probate, taxes, and planning for your financial future. All too often, the surviving spouse makes irrevocable financial decisions or unnecessary purchases in the days and weeks following a partner’s death. Unfortunately, widows and widowers are easy prey for con artists. Someone may call with a great deal on a “sure fire” investment, or attempt to capitalize on your grief by offering unnecessary goods or services. A trusted professional advisor can provide objectivity when such “opportunities” are presented.
* Plan before a death occurs. Ideally, you and your spouse will develop a financial plan before a death occurs. One way to organize such a plan is to set up a tabbed binder that outlines the family’s financial affairs. One tab might list key contacts, such as lawyers, accountants, and business associates. Another tab might disclose the location of important documents.
Discussing and documenting your financial affairs will be time well spent. If you need assistance, give us a call.
To contact these business accountants and get the best tax advice and guidance, call Cirimelli Pyle and Associates at 408-879-9990. If you need more information visit their website at www.cpasllp.com .
