Net Operating Loss: Carryback & Carryforward as a Tax Strategy. Tax Compliance & Planning TCP CPA.

In this video, I discuss how corporate net operating loss used as acrryback and carryforward as a tax strategy as covered on the tax compliance and planning TCP of the CPA exam.
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A corporate Net Operating Loss (NOL) occurs when a company's allowable tax deductions exceed its taxable income within a tax year. This situation means that the company has incurred more expenses than it has earned in revenues, leading to a negative taxable income. NOL provisions in tax law allow corporations to use these losses to offset taxable income in other years, providing a form of tax relief.
Corporations can apply NOLs in two ways:
Carryforward: Companies can carry NOLs forward to future tax years to offset taxable income, potentially reducing future tax liabilities. The number of years a loss can be carried forward depends on the tax laws in effect for the year in which the loss was generated.
Carryback (when applicable): Companies can also apply NOLs to past tax years, effectively amending previous years' tax returns to reduce previously reported taxable income and claim refunds for taxes paid in those years. However, carryback provisions have been subject to change and are not always available, as seen in recent tax law revisions.
The rules governing the treatment of NOLs, including how long they can be carried forward and the percentage of taxable income they can offset, have evolved over time due to legislative changes.
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