What the Form Is For

Form 1045 is the IRS's "fast-track" refund application that lets individuals, estates, and trusts get their money back quickly when they've overpaid taxes in previous years. Think of it as an express lane at the tax refund counter. Unlike a standard amended return that can take months to process, Form 1045 gets you an answer within 90 days.

The form handles four specific situations: when you have a Net Operating Loss (NOL)—meaning your business deductions exceeded your income for the year; when you have unused general business credits that you couldn't fully use; when you have a net section 1256 contracts loss (typically from futures or options trading); or when you need to claim a refund due to a claim of right adjustment under section 1341(b)(1), which applies when you had to repay income you reported in an earlier year.

The most common use is for business owners who had a tough year and lost money. That loss can be "carried back" to offset income from profitable years, generating a refund of taxes you've already paid. IRS.gov

When You'd Use It (Late/Amended Returns)

You file Form 1045 after you've filed your current year's tax return—the one showing the loss or unused credit. For a 2023 loss, you'd file your 2023 return first, then submit Form 1045 to apply that loss to earlier years (typically 2021 and 2022 for farming losses, or just 2022 for most other NOLs).

The deadline is strict: you must file within one year after the end of the tax year in which the loss or unused credit occurred. For calendar-year 2023 filers, that means you have until December 31, 2024, to file Form 1045. Don't confuse this with your regular tax filing deadline—this is a separate, later deadline that starts counting from year-end, not from April 15.

Important timing note: You cannot file Form 1045 before filing your 2023 tax return. File your return first, then send Form 1045 in a separate envelope to your regional IRS Service Center (the same one where you filed your tax return). Never staple them together or mail them in the same envelope, as they're processed by different departments. Instructions for Form 1045

Key Rules for 2023

Limited carryback periods: For most taxpayers, NOLs arising in 2023 cannot be carried back at all—they can only be carried forward to future years. However, farming businesses get special treatment and can carry losses back two years. Certain insurance companies also qualify for the two-year carryback. This is a major change from earlier years when broader carryback rules existed.

The 80% limitation: For NOLs carried forward (not back), there's a cap: you can only use the NOL to offset up to 80% of your taxable income in any given year. This limitation doesn't apply the same way to carrybacks, but it's worth understanding if you have losses to carry forward.

Alternative Minimum Tax (AMT) considerations: Carrying back an NOL can unexpectedly trigger AMT liability in the carryback year, even if you didn't owe AMT originally. You'll need to complete Form 6251 for each carryback year to check this.

Child Tax Credit complications: If you're carrying losses back to 2021, be aware that this changes your adjusted gross income, which could affect your advance Child Tax Credit payments and potentially create repayment obligations. The instructions provide worksheets to recalculate these amounts.

Section 965 exclusion: If you're carrying a loss back to a year when you had a section 965(a) inclusion (related to certain international tax provisions), you cannot use Form 1045—you must file an amended return (Form 1040-X) instead. Instructions for Form 1045

Step-by-Step (High Level)

Step 1: Determine eligibility

Confirm you have a qualifying loss or credit from 2023 and that you qualify for carryback (typically only farmers and certain insurance companies for 2023 NOLs).

Step 2: File your 2023 return

Complete and submit your regular 2023 Form 1040 (or Form 1041 for estates/trusts) showing the loss. Don't file Form 1045 until this is done.

Step 3: Calculate your NOL

Use Schedule A of Form 1045 to compute your actual net operating loss. This involves adjusting your taxable income by removing certain non-business deductions and capital losses. The calculation can be complex—you're essentially separating business losses from personal deductions.

Step 4: Complete Schedule B if necessary

If your NOL isn't fully absorbed in the first carryback year, use Schedule B to calculate how much carries to the second year. This schedule also handles adjustments to itemized deductions based on your refigured income.

Step 5: Fill out the main form

Complete lines 10-32, creating "before and after" columns for each carryback year. You'll recalculate your tax liability as if you had the lower income from the loss carryback. This includes refiguring AGI-dependent items like IRA deductions, itemized deductions, and various credits.

Step 6: Gather attachments

Attach copies of your 2023 return (pages 1-3 of Form 1040 plus relevant schedules), all schedules showing the loss (Schedule C, Schedule F, etc.), Form 6251 for each carryback year, and any other forms that changed due to the carryback.

Step 7: Sign and mail

Both spouses must sign if married filing jointly. Mail to your IRS Service Center in a separate envelope from any other correspondence. Instructions for Form 1045

Common Mistakes and How to Avoid Them

Mistake #1: Filing too early

Many taxpayers try to file Form 1045 at the same time as their current-year return. The IRS will reject it. Wait until after you've filed your 2023 return, then submit Form 1045 separately.

Mistake #2: Incomplete attachments

The IRS may delay or disallow your application if you don't include required documentation. Create a checklist: copies of your 2023 return and schedules, Form 6251 for each carryback year showing AMT calculations, all schedules showing how the loss arose, and refigured forms for the carryback years. Missing a single required form can stop processing cold.

Mistake #3: Math errors in the "before/after" columns

Lines 10-32 require you to show calculations twice—once with original figures and once after applying the carryback. Double-check every line. A single math error can lead to disallowance of the entire application, and unlike a regular amended return, you can't challenge a disallowed Form 1045 in court.

Mistake #4: Forgetting to refigure AGI-based items

When you change your AGI by carrying back a loss, numerous other tax items recalculate automatically: IRA deduction limits, student loan interest deduction, itemized deductions subject to AGI floors (like medical expenses), and various credits. The instructions provide worksheets—use them meticulously.

Mistake #5: Not checking AMT

Carrying back a loss to a year when you didn't owe AMT can create AMT liability for that year. Always complete Form 6251 for each carryback year to see if AMT applies after the carryback. If you skip this, you might owe more tax than expected.

Mistake #6: Assuming you qualify for carryback

For 2023, most NOLs cannot be carried back—only forward. Verify you're actually eligible (farming business or qualifying insurance company) before spending time on this form. If you don't qualify, your only option is to carry the loss forward to 2024 and beyond. Instructions for Form 1045

What Happens After You File

The IRS begins its 90-day processing clock on the later of two dates: when you file a complete application, or the last day of the month that includes your 2023 return's due date (including extensions). If you filed your 2023 return on April 15, 2024, and then filed Form 1045 on May 1, 2024, the IRS has until early August 2024 to act.

During processing, an IRS examiner reviews your application. They may contact you or your tax professional for clarification or additional documentation. If you listed a power of attorney (Form 2848), they'll contact that representative. Make sure your contact information is current and check your mail regularly.

Three possible outcomes: First, approval—you receive your refund within the 90-day window, usually via direct deposit if you included Form 8302 for refunds over $1 million, or by check. Second, partial disallowance—the IRS agrees with some of your calculations but not all, and refunds a smaller amount. Third, complete disallowance—the IRS rejects the application due to material omissions, errors, or disagreements.

Important limitation: Getting your refund doesn't mean the IRS agrees you filed correctly. This is a "tentative" refund, meaning provisional. The IRS can later audit the underlying return and determine you owe some or all of the money back, plus interest and penalties. The 90-day processing window is for speed, not for final determination of correctness.

If disallowed: You cannot sue or appeal the disallowance of Form 1045. However, you can still file a regular amended return (Form 1040-X) to claim the refund through the normal process. Form 1040-X takes much longer to process (often 16-20 weeks or more) but gives you full appeal rights if denied.

Excessive refunds: If the IRS later determines they refunded too much, they'll bill you as if you had made a math error on your original return. You'll owe the excess amount plus interest compounded daily from the refund date. Instructions for Form 1045

FAQs

1. Can I use Form 1045 instead of Form 1040-X for carrybacks?

Yes, for individuals, you have a choice. Form 1045 is faster (90-day turnaround) but offers no appeal rights if disallowed and can't be used for section 965 years or to carry back released foreign tax credits. Form 1040-X takes longer (often 4+ months) but provides full appeal rights and works for all situations. If speed matters and your case is straightforward, use Form 1045. If you anticipate disputes or your situation involves international tax complications, use Form 1040-X.

2. What if I have losses from multiple years to carry back?

If you're carrying back losses from different years, you must file a separate Form 1045 for each loss year. For example, if you're carrying back both a 2023 loss and a 2022 loss, file two separate forms. However, if one loss year creates unused credits that carry to the same prior years as another loss, you may need to coordinate the forms or file them sequentially.

3. Do I need professional help to complete this form?

Form 1045 is genuinely complex. Schedule A's NOL calculation requires understanding the difference between business and non-business income and deductions. The line-by-line "before and after" computations demand extreme attention to detail. If your loss is substantial (generating a refund over $10,000), or if you're unfamiliar with tax preparation, hiring a CPA or enrolled agent is usually money well spent. The cost of errors—delay, disallowance, or triggering an audit—often exceeds professional fees.

4. What happens to any NOL I can't use in the carryback years?

Any portion of your 2023 NOL that isn't absorbed by the two carryback years (for farming losses) carries forward indefinitely to future tax years, starting with 2024. You'll deduct it on your 2024 return, subject to the 80% limitation. If not fully used in 2024, it carries to 2025, then 2026, and so on, until fully absorbed. Keep meticulous records—you'll need to track the carryforward amount each year.

5. Can I e-file Form 1045?

Starting with tax year 2024 (filed in 2025), Form 1045 becomes available for electronic filing. However, for 2023 Form 1045 applications, you must paper-file. Mail the complete application with all attachments to your IRS Service Center. Use certified mail or a trackable delivery service so you have proof of mailing and can confirm receipt.

6. What if I'm self-employed with a home office—does that count as a farming loss?

No. The special two-year carryback for farming losses applies only to actual farming businesses—raising crops, livestock, poultry, fish, or certain tree operations. Simply having a self-employed business that happens to lose money doesn't qualify. Review section 263A(e)(4) and Schedule F instructions to verify whether your business qualifies as a farming business. Most consultants, freelancers, and service providers don't meet the definition.

7. Should I wait to file Form 1045 until I'm sure of the loss amount?

Yes, but don't wait too long. You have one year after the end of the tax year to file. Use that time wisely: gather all receipts, finalize your books, and ensure your loss calculation is accurate. Filing an incorrect Form 1045 that gets disallowed wastes your "fast-track" opportunity. However, waiting until the last minute creates risk if you encounter problems gathering documentation. Aim to file Form 1045 within 3-6 months after filing your regular return—giving yourself enough time for thoroughness while preserving your deadline cushion.

For the official forms and most current information, visit IRS.gov/Form1045