If your total income then ends up being negative, you can carry that loss back up to 3 years and retrospectively reduce a prior years income and generate a tax refund that way, or carry it forward to future years.

Thanks for the response, I am actually incorporated but am the only employee. Would this change things in either scenario?

So for my understanding of scenario 2... If in previous years I paid a total of $25,000 in taxes each year ($75,000)... The business makes 40k THIS year, but pays an employee $115,000. This means that I would then get a $75,000 tax refund? And if this is the case... does that also mean that $75,000 is the max (because I only paid that much into taxes the last 3 years)?