Carryback in tax accounting refers to computing the current year's taxes, profits & losses, deductions, etc. and subsequently revising a previous year’s filed tax return to reduce some amount of tax liability. (See also: carryover)
A loss carryback is a case where a business while encountering net operating loss during the current year, applies this loss to an already filed preceding year's tax return. Due to application of additional loss in preceding year’s tax return, the tax liability for the previous year gets reduced. This in turn helps the business to receive a refund of previously paid taxes (if any).
[Last updated in June of 2021 by the Wex Definitions Team]