At we come to the conclusion of 2008, many businesses, including construction, trucking companies and farmers, have lost money in this year. The economy for 2009 looks very volatile and some industries may start to recover in 2009, while others may take a little longer.  One positive area to bring to the table is that the price of oil has decreased significantly and regular gas prices have come down to $2.00 or so per gallon depending upon your location.  The question through this difficult year where losses have mounted up, why do you have to tax plan?  If you were profitable in year 2006 and/or 2007 and paid business taxes in those years, you may be entitled due a tax refund in 2008 to recover part or all of these monies paid in previous years. This tax recovery is called a net operating loss carry back claim…This situation applies to proprietorships, corporations, limited liability corporations, and so forth.

The first part of this discovery phase is to identify whether you are a qualified individual and/or company to recapture monies paid in from prior years…It would be a good idea to obtain from your accountant, bookkeeper, CPA, or your own in house books an updated balance sheet and profit and loss statement for 2008. Additionally, you may want to locate your 2006 and 2007 either personal and or corporate tax returns and review the past years information. If you have paid business taxes in those past years and are in loss situation for 2008, there is a good chance you will be able to recover either partial or all monies paid to the

government for 2006 and/or 2007..If you are a farmer and have losses in 2008, you should locate your 2003, 2004, 2005, 2006, and 2007 prior years tax returns because your eligible carry back years extend back for five years. Everybody else, for the most part, can carry back their business losses two years…

 Once you have located your prior years tax returns and reviewed the business taxes paid into those years, compare this to the 2008 Profit and Loss Statement. It is good idea that your 2008 information should be current and accurate because it could have a major effect on your decision making. Assuming you are in a loss situation for 2008, you may want to plan you year end cash flow accordingly. For this illustration, we will assume everyone is on a cash not accrual basis accounting system. Because of your tax situation and the possibility of recovering a tax refund back in early 2009, you may, if cash flow permits, pay more bills in December 2008 than the normal January 2009 payment cycle. The bottom line here is that a qualified professional should be assisting you at this stage because of the cash flow and tax effect though the period ending December 31, 2008.  The professional cost vs tax recovery benefit could be a big plus to you.

 Here is a scaled down example for mostly everyone except farmers and other exemptions. Lets say you had business income in 2006 for $20,000 and business income in 2007 for $30,000. From your 2008 Profit and Loss Statement through the end of October, you have a $40,000 Loss.. We are in the middle of November 2008 and you can control your business for a zero profit for November and December 2008 with $20,000 of bills due January 1, 2009….If we don’t do anything else, we can carry back the losses, once the 2008 personal and/or corporate tax return is filed, $20,000 back to 2006 and $20,000 to 2007. Depending on your tax bracket in those years, you will have a nice refund.                  

For this example, if we have an opportunity to pay $10,000 of additional bills before December 31, 2008, if your cash flow permits, lets see what this means. The difference of a couple days would mean that we would recover at a minimum $1500 of additional taxes paid in prior years. Not paid for shifting some paid bills for a couple of days.

The following procedures are needed to get your business tax refunds back as back as quickly as possibly. First you need to file your normal 2008 personal, corporate, LLC, Partnership etc tax returns as quickly as possible in 2009. Once these returns are filed with the Internal Revenue Service, you can file the carry back claims on either form 1045 or 1139 depending upon your tax structure. If you are a C Corporation, you don’t need to file your personal tax return as part of this carry back process.

 The carry back claims will be processed by the IRS as quickly as there system permits and the individual and/or corporate entity could be receiving a refund check somewhere in the first or second quarter of 2009.

This carry back claim process is important because it can generate needed working capital if the economy hasn’t recovered in your niche for 2009. Additionally, with all the available acquisition and financing deals available for commercial vehicles and construction trucks and equipment, these monies could be used as a down payment or a combination of working capital and acquisition funds.

These carry back claims can be carried back two years, except for farmers, five for them, and if needed carry forward for twenty years. It doesn’t matter what your business structure is…There are exemptions to these rules and you should consult your tax professional for advise on these carry back and carry forward rules. 

In conclusion, 2008 was a trying year for many, but this recapture of tax monies shouldn’t be ignored. If done properly, you can get a head start on 2009 and have a profitable and less stressful year… … Who says Tax Planning is boring. 

www.cclgequipmentleasing.com