carryback

carryback

A business operating loss that, for tax purposes, may be deducted for a certain number of prior years, usually no more than three. A business uses a carryback to recover taxes paid on income earned in prior years. For example, if a firm experiences a year of large losses following a period of profitable operations, it may use the losses to cancel out profits from preceding years on which taxes have been paid. When the taxes a company paid on profits are canceled because of a carryback, the firm is issued a refund by the Internal Revenue Service. Also called carryover, tax loss carryback.

Main Entry: car·ry·back
Pronunciation: 'kar-E-"bak
Function: noun
: the portion of an income tax deduction (as for a net operating loss) or credit which cannot be taken entirely in a given period and which may be deducted from taxable income of a prior period —compare CARRYOVER