I owned a LLC I lost about $150,000.00 in 07. I still owe taxes for 05. Can you apply current losses toward old tax bills?

Thanks Dustin

Generally speaking, when a taxpayer has a Net Operating Loss at the end of the year (this is called the "NOL year"), then that taxpayer is entitled to carryback the whole NOL to the two tax years before the NOL year. This is commonly referred to the "carryback period."

It worth noting that the "American Recovery and Reinvestment Act (ARRA) legislation affecting carrybacks, that was passed earlier this year allows certain taxpayers to make an irrevocable election to carry back applicable 2008 losses for up to 5 years."

Now, if there's any leftover NOL after the carry back period, the taxpayer is entitled to carryforward the balance for up to 20 years after the NOL year (the "carryforward period").

Alternatively, the taxpayer can waive the two-year carryback period and use the NOL for the carryforward period only. This could be advantageous if the taxpayers taxable income in the past two years was minimal or if the taxpayer believes that their taxable income after the NOL year would be significantly higher than the carryback period.

For a taxpayer to waive the carryback period, all they need to do is to attach a statement to their original tax return for the NOL year specifying that "you're waiving the carryback period under Internal Revenue Code § 172(b)(3)."

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