The IRS has issued guidance on how companies can claim a refund under a recent congressional act that extends net operating loss (NOL) carryback provisions.

While typically companies can carry NOL back for up to two years, the Worker, Homeownership, and Business Assistance Act of 2009 allows companies to carry losses back as far as five years. This gives companies a greater opportunity to improve cash flow by claiming a refund on taxes paid as far back as five years ago.

This Compliance Week article examines the IRS guidance and also explains how companies need to be aware that carrying a tax benefit into a settled tax year can re-open the tax return to IRS scrutiny, even if the statute of limitations were otherwise closed. In addition to the potential tax consequences, financial reporting consequences may also exist.