Net Operating Loss

Net Operating Loss can be defined as a specific period or indication where the company comes to have a negative taxable income. This situation arises when the taxable income of the company is less than the actual tax deductions of the company as a result the company falls in loss instead for earning some profit. Another reason behind this situation is that the company has encountered more expenses as compared to the revenue reserves for that particular financial period.

The period of net operating loss can be used by the company to recuperate and pull through tax payments that are made in past or to reduce the tax payments that are coming in the future. The net operating loss period helps a company to have a sigh of relief in their bad time when they are experiencing some loss and can’t pay the taxes.

There are two ways of applying for tax relief a company is going through the net operating loss period. One way is that to receive a tax credit or a tax loan by referring to the past tax payments that has been paid by the company. The other way is to apply net operating loss condition for the future so that the company must receive the reduced tax payments in future. The terms and conditions that a company will receive in terms of tax relief depends upon various conditions such as the severity of the operating loss period, the past taxpaying record of the company and the current market position of the company.