If you’re a contractor who’s landed a big government deal and you’re googling “nol carryback explained for business owners,” you’re in the right place. Let me break this down without the IRS lingo or tax code overload. This isn’t theory—this is real money that can help you fund your next move today, not five years from now.
Why Government Contractors Should Care About NOL Carrybacks
Let us paint a picture. You just secured a government contract worth seven figures. Congrats! But here’s the reality: the feds don’t pay upfront. You’re floating payroll, materials, insurance—everything—until the check clears. Meanwhile, your bank’s moving slow, and private lenders want high rates or a chunk of equity.
Enter: Net Operating Loss Carrybacks—the ultimate tax cheat code.
This isn’t just tax strategy. This is liquidity. If your business had a rough year last year (or even the year before that), the IRS may actually owe you money right now. And you can use that refund to fuel your current contract.
We had a client, let’s call him Mike, who had a $1.8M NOL in 2023. In 2024, he landed a DoD subcontract and needed $150K to cover his startup costs. We carried that loss back to his profitable 2019-2021 tax years and he got a refund check from the IRS for $472,000. Fast. That’s what I’m talking about.
What the Heck Is a Net Operating Loss (NOL)?
Let’s simplify it. A Net Operating Loss (NOL) is when your business expenses outweigh your income in a tax year. It’s not a failure—it’s usually a signal you’re growing fast or investing in your future. Common reasons you might show a loss:
Hiring a bunch of people quickly
Buying equipment or technology
Front-loading R&D or compliance costs
Delayed revenue (like waiting on a government payout)
If that’s you, you’re not broke—you’re just misaligned on timing. And that’s where the NOL carryback comes in.
Carryback vs. Carryforward: Timing Is Everything
The IRS gives you two options when you’ve got an NOL:
Carryforward: Offset your future profits. Great if you’re planning long-term. Useless if you’re broke today.
Carryback: Apply your current loss to past profitable years. You amend those past returns, and boom—the IRS sends you a refund check based on what you overpaid back then.
If you’re looking for the fast lane to cash, carrybacks are it. That’s why this article is titled “nol carryback explained for business owners”—because it’s not some CPA nerd theory, it’s a legit financial lever.
How the NOL Carryback Process Works (Without the Legal Jargon)
Here’s the playbook I use with clients:
1. We Find the Loss
We start by calculating your net operating loss. You’ll need solid books and tax returns, especially for the year you’re claiming the loss.
2. We Pick the Target Years
Most of the time, we can carry the loss back up to 5 years. That means if you had profits in 2019 or 2020 and losses in 2023, we can apply that loss backward and get you a refund based on taxes you already paid.
3. We File Forms (You Don’t Have To)
Depending on your entity type (LLC, S-Corp, C-Corp), we’ll file either Form 1139 or Form 1045 with the IRS. This lets us claim the refund fast—sometimes within 60 to 90 days.
4. You Get Your Refund
Seriously, the check shows up. And no, this isn’t like waiting on an SBA loan—this comes straight from Uncle Sam.
Does This Still Work in 2025?
Yes—but with a few caveats. The CARES Act in 2020 brought back the 5-year NOL carryback temporarily. Depending on your tax year, you may still be eligible to claim those refunds if you act fast. Even if you’re outside the CARES Act window, other rules may still allow a carryback depending on your business structure and year-end.
The key? Talk to someone who knows both tax law and how government contracting works. Not all CPAs do.
Why Government Contractors Should Leverage NOL Carrybacks
Let’s be real: winning a contract doesn’t mean you’re profitable today. Most small businesses get crushed in the startup phase of a federal contract because they’re short on capital. NOL refunds give you an edge. Here’s how:
Cash for Payroll & Materials: Most contractors pay out-of-pocket for weeks—or months—before seeing a dime from the government. NOL refunds plug that cash flow hole.
Boost Your Balance Sheet: Need bonding? Want to look better for a factor or lender? A fresh six-figure refund can help you qualify.
Non-Dilutive Capital: This isn’t equity. You’re not giving up ownership. You’re taking back money the IRS already collected from your profitable years.
Big Mistakes to Avoid
You know what kills me? Seeing businesses leave money on the table because no one told them this existed. Don’t make these mistakes:
Waiting Too Long
You only have a limited window to carry back losses. Miss the deadline? You’re stuck carrying forward (aka, waiting years for the benefit).
Assuming You Don’t Qualify
Some think NOLs are only for massive corporations. Not true. I’ve helped companies with $500K in annual revenue and $50M both get six-figure refunds.
DIY Gone Wrong
TurboTax isn’t built for this. You need someone who understands NOL carryback explained for business owners—especially ones scaling government contracts.
Advantages of Partnering with Icarus Fund
We’ve worked with contractors across the U.S.—from cybersecurity startups to defense suppliers. When you have someone who understands both tax strategy and federal contracting, you unlock massive financial upside.
We coordinate directly with factoring companies, help clean up your books, and make sure your NOL refund gets leveraged strategically—not just spent randomly. One client used their refund as proof-of-funds to land a $3M SBA line. Another bought their first building, cash.
Take What’s Yours
If you’re growing and losing money in the short term—it doesn’t mean your business is weak. It means you’re investing ahead of revenue. With the right moves, that loss can become your most valuable asset.
Don’t let tax code confusion block your access to capital. The IRS owes you? Let’s collect.
Ready to Claim Your Refund?
If you’re a business owner looking to finance a government contract—or you had a loss in recent years—don’t wait. Let’s find out if the IRS owes you a refund.
👉 Click here to schedule a free 15-minute consultation with Icarus Fund, that specializes in NOL carrybacks for government contractors.
Because cash flow shouldn’t be what holds you back from fulfilling that contract you already won.
