Relief provided under the Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA) allows taxpayers to elect to carry back a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. An NOL or loss from operations carried back five years may offset no more than 50% of a taxpayer’s taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year. The relief applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after December 31, 2007, and beginning before January 1, 2010.
The election must be made by the due date (including extensions) for filing the tax return for the last taxable year beginning in 2009. This is true whether the election is made for losses incurred in 2008 or 2009. The election is made by either attaching an election statement to the federal income tax return or amended return for the tax year in which the loss is incurred; or attaching an election statement to the carryback form itself (Form 1045, 1139, 1040X, 1120X, or amended 1041, or 990-T).
To avoid delays do not send Form 1045, Application for Tentative Refund, or 1139, Corporation Application for Tentative Refund, in the same envelope as the original tax return that is generating the NOL.
The IRS has provided FAQs on this relief and the election on its website.