What Form 1139 (2016) Is For
IRS Form 1139, Corporation Application for Tentative Refund, is used by C corporations to request a quick refund from the IRS. It allows companies to apply a net operating loss or unused tax credits from the 2016 tax year to prior profitable years. By carrying these losses back, corporations can recover previously paid income tax faster than through a traditional amended return.
Only C corporations are eligible to file Form 1139. Partnerships, S corporations, estates, and trusts must use other forms or methods for refunds. The form is especially valuable when a corporation needs cash flow relief after an unprofitable year, as it enables access to funds within 90 days of filing.
When You’d Use Form 1139
Corporations use Form 1139 when they experience a net operating loss, net capital loss, or unused general business credit in a given tax year that can be applied to offset taxable income from previous profitable years. This application for a tentative refund allows a corporation to recover overpaid income taxes more quickly than filing an amended return.
Form 1139 must be filed within 12 months after the end of the loss year, and the corporation’s regular income tax return for that year must be filed before or at the same time. If the deadline is missed, the corporation must file Form 1120X instead, which takes longer to process.
Key Rules or Details for 2016
For the 2016 tax year, corporations could generally carry back a net operating loss for two years and carry it forward up to twenty years. Net capital losses could be taken back three years, while unused general business credits were held back one year. Corporations also had the option to waive the carryback period and carry losses forward to offset future taxable income, which was often beneficial for companies anticipating higher earnings or avoiding the alternative minimum tax.
These rules were based on tax law before the Tax Cuts and Jobs Act, which later limited or eliminated many carryback options. For 2016 filings, C corporations were required to ensure accurate calculations of deferred tax assets, dividends received deductions, and any adjustments under applicable tax code provisions.
Learn more about federal tax filing through our IRS Form Help Center.
Step-by-Step (High Level)
Step 1: File Your Regular Corporate Return.
Complete Form 1120 for the 2016 tax year to establish your loss or unused credits before submitting Form 1139.
Step 2: Gather Records for Carryback Years.
Collect prior-year tax returns from 2014 and 2015, including taxable income, tax payments, and adjustments that will be affected by the carryback.
Step 3: Complete Form 1139.
Fill out the form to identify the loss or credit being carried back and recalculate the prior years’ tax liability. The form provides columns for up to three carryback years.
Step 4: Attach Supporting Documentation.
Include copies of the 2016 Form 1120, relevant schedules such as Schedule D for capital losses, and documentation for general business credits.
Step 5: Mail to the IRS Service Center.
Submit Form 1139 to the same IRS Service Center where the corporation typically files its income tax return. The form must be mailed separately, not attached to Form 1120.
Step 6: Monitor Processing.
The IRS has 90 days from the later of receiving the completed application or the due date of the return to process the refund.
Corporations may consult a tax professional to ensure accurate calculations, proper documentation, and compliance with carryback period rules.
Common Mistakes and How to Avoid Them
Corporations frequently encounter refund delays or denials due to preventable errors when filing Form 1139. Understanding these issues helps ensure accurate submissions and timely processing.
- Filing Form 1139 before filing Form 1120: The IRS requires the corporate income tax return for the loss year to be filed before or at the same time as Form 1139. Filing early will result in automatic rejection.
- Missing the 12-month filing deadline: The tentative refund window is limited to 12 months after the close of the loss year. Mark deadlines promptly to avoid missing eligibility.
- Misapplying losses between years: Losses must be applied to the earliest carryback year first and then to later years. Incorrect sequencing may produce inaccurate refund amounts.
- Neglecting state filings: Form 1139 covers only federal income tax. State refund claims must be filed separately, often after the IRS has approved the federal adjustment.
Careful documentation, accurate calculations, and timely filing help corporations avoid IRS rejections and ensure faster approval of tentative refund claims.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After a corporation files Form 1139, the IRS reviews the application to verify accuracy and completeness. If approved, the agency issues a tentative refund within 90 days of receipt or the due date for the loss-year return. Large refund claims may be subject to additional review by the Joint Committee on Taxation. Corporations should maintain thorough documentation, as the IRS can later audit or adjust the refund based on revised tax treatment.
FAQs
Can C corporations use IRS Form 1139 (2016) to claim a quick refund?
Yes, C corporations can use Form 1139, Corporation Application for Tentative Refund, to claim a quick refund of income tax by carrying back a net operating loss to profitable tax years. This helps improve cash flow efficiently.
How does a net operating loss affect taxable income?
A net operating loss reduces taxable income from previous tax years by allowing a carryback to earlier profits. It can also offset future taxable income when carried forward, creating valuable tax benefits for corporations.
Can Form 1139 help offset future taxable income?
Form 1139 allows you to apply losses from past tax years to obtain a tentative refund; however, unused losses may be carried forward to offset future taxable income. This approach provides flexibility and helps stabilize business deductions across multiple years.
Are alternative minimum tax and deferred tax assets affected by a carryback claim?
Yes, when corporations file Form 1139, the carryback of losses may affect deferred tax assets and alternative minimum tax calculations. Tax professionals should review the tax treatment carefully to prevent future adjustments.
What happens to unused general business credits and capital losses?
Unused general business credits and net capital losses may be carried back to earlier tax years or carried forward indefinitely. The carry-forward rules vary by tax law, so corporations should consult IRS publications for guidance.
How did the Tax Cuts and Jobs Act change net operating loss deductions?
For tax years beginning after 2017, the Jobs Act generally eliminated most NOL carrybacks and allowed NOL deductions to be carried forward indefinitely. However, Form 1139 still applies to earlier years, such as 2016, under prior tax rules.
Can small businesses and S corporations file Form 1139 for tax refunds?
Only C corporations may file Form 1139 for a tentative refund. S corporations, estates, and trusts must use different forms for tax refunds or carrybacks, as the corporation application for tentative refund applies solely to C corporations.
