TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

A net operating loss on your 2017 tax return isn’t all bad news When a company’s deductible expenses exceed its income, generally a net operating loss (NOL) occurs. If when filing your 2017 income tax return you found that your business had an NOL, there is an upside: tax benefits. But beware — the Tax Cuts and Jobs Act (TCJA) makes some significant changes to the tax treatment of NOLs. Pre-TCJA law - the old law Under pre-TCJA law, when a business incurs an NOL, the loss can be carried back up to two years, and then any remaining amount can be carried forward up to 20 years. The carryback can generate an immediate tax refund, boosting cash flow. The business can, however, elect instead to carry the entire loss forward. If cash flow is strong, this may be more beneficial, such as if the business’s income increases substantially, pushing it into a higher tax bracket — or if tax rates increase. In both scenarios, the carryforward can save more taxes than the carryback bec...

Business Tax Law Changes The following is my client letter addressing the Business Tax Law Changes in the Tax Cuts and Jobs Act of 2017: On December 22, the President signed into law the Tax Cuts and Jobs Act of 2017 (TCJA). The 503-page TCJA is the largest tax overhaul since the 1986 Tax Reform Act and it will affect almost every individual and business in the United States. Unlike the provisions for individuals, which generally expire after 2025, the business-related provisions in the TCJA are permanent and generally take effect in tax years beginning after 2017. For businesses, highlights of the TCJA include: (1) an increase in amounts that may be expensed under bonus depreciation and Section 179; (2) a 21 percent flat corporate tax rate; (3) a new business deduction for sole proprietorships and pass-through entities; and (4) the elimination of the corporate alternative minimum tax (AMT). Overview of TCJA Changes Affecting Businesses The following is a summary of some of t...

Tax Cuts and Jobs Act: Key provisions affecting businesses The recently passed tax reform bill, commonly referred to as the “Tax Cuts and Jobs Act” (TCJA), is the most expansive federal tax legislation since 1986. It includes a multitude of provisions that will have a major impact on businesses. Here’s a look at some of the most significant changes. They generally apply to tax years beginning after December 31, 2017, except where noted. Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21% Repeal of the 20% corporate alternative minimum tax (AMT) New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025 Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1...

Net Operating Loss Carryovers for Individuals The American Recovery and Reinvestment Act of 2009 (ARRA) provides   individual taxpayers potential net operating loss (NOL)  deductions. The IRS has provided opinions stating the ARRA  applies to individual s. An “Eligible Small Business” can elect to carry back a 2008 NOL for  up to five years. The IRS has broadly interpreted the definition of such businesses. Call Ronald J. Cappuccio, J.D., LL.M.(Tax) at (856) 665-2121 if you need some guidance on the NOL changes.