We’ve stumbled upon a situation that might create confusion for businesses that qualified for the 5-year carryback of General Credits under a provision of the Small Business Jobs Act of 2010.
I received a call on October 11 (just a couple weeks ago) from an Arizona restaurant owner who was a little confused by conflicting information about the carryback provision for the Work Opportunity Tax Credit.
The language on the IRS website, as of October 11, clearly stated that credit carried forward to 2010 AND credit earned in 2010 could all be carried back 5 years. Since this seemed slightly counterintuitive to me, I called the IRS. An agent confirmed that indeed this was the case.
One day later – on October 12, 2011 – the IRS revised the language on its website. Here’s the entire revised section, for your convenience. Please notice the very last sentence, here underlined for emphasis.
**** begin quote:
Sect. 2012: General business credits of eligible small businesses for 2010 carried back 5 years
The new law allows an eligible small business to carry back general business credits five years. Previously, the credits could only be carried back one year. The carryback is for credits determined in the first taxable year beginning after December 31, 2009.
An “eligible small business” in general is defined as follows:
A corporation whose stock is not publicly traded, a partnership, or a sole proprietorship, and
The taxpayer must have $50,000,000 or less in average annual gross receipts over the three preceding tax years.
This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits earned in the tax year 2010.
****end quote. See IRS Website.
Prior to October 12, the last sentence used to say:
“The five-year carryback period is available only for credits carried forward to the tax year 2010 and/or earned in the tax year 2010″
QUESTION: What about tax payers who may have already relied on the previous language, amending 5 years of federal tax returns with carrback that incorrectly included tax credit earned prior to 2010? Are you one of them? Please let me know.