How can losses be good? They can when they mean cash to you now. If 2009 wasn't profitable for your business, you can turn lemons into lemonade by claiming a net operating loss (NOL) carryback. The NOL is used to offset income reported in certain prior years so you can obtain an immediate refund of taxes paid in those years. Normally, there is a two year carryback. However, there is now a choice to use a longer carryback period so you can get a larger refund.

Under the American Recovery and Reinvestment Act of 2009, for NOLs that arose in tax years beginning or ending in 2008, there was an option to use a three-, four-, or five-year carryback; this option applied only to "small businesses" (those with average annual gross receipts under $15 million for the three years ending with the tax year of the NOL).

The Worker, Homeownership and Business Assistance Act of 2009 continues the longer carryback option for 2009 NOLs (although only half of the income in the fifth carryback year can be offset) and has eliminated the gross receipts test. Small businesses can use the longer carryback for both 2008 and 2009; businesses that don't meet the gross receipts test can use the longer carryback for either 2008 or 2009.

Refunds from NOL carrybacks can be made in two ways:

• By filing amended returns for the carryback years. C corporations use Form 1120X, Amended U.S. Corporation Income Tax Return; other business owners use Form 1040X, Amended U.S. Individual Income Tax Return.
• By filing for a "quick refund." C corporations use Form 1139, Corporation Application for Tentative Refund; other business owners use Form 1045, Application for Tentative Refund. Forms can be found at www.irs.gov. Refunds usually are issued within 45 days. Note: The 2009 version of Form 1045 is not yet available.

Barbara Weltman, www.barbaraweltman.com.  To receive Barbara Weltman's Big Ideas for Small Business^TM, a monthly print newsletter providing important and timely information for small business owners about saving time and money, avoiding trouble and boosting the bottom line, please visit: http://www.barbaraweltman.com.