What Form 1139 Is For

Form 1139 is a specialized IRS form that allows corporations (excluding S corporations) to apply for a quick tax refund when certain financial losses or overpayments occur. Think of it as an express lane for getting money back from Uncle Sam – instead of waiting months or even years through the normal amended return process, Form 1139 can get you a refund decision within 90 days.

Corporations use this form when they need to "carry back" specific tax benefits to previous years. The four main situations include:

1. Net Operating Loss (NOL) Carryback: When your company loses more money than it makes in a given year, you can apply those losses to offset profits (and taxes paid) from earlier profitable years.
2. Net Capital Loss Carryback: Similar to NOLs, but specifically for losses on the sale of capital assets like stocks, bonds, or property.
3. Unused General Business Credit Carryback: When your corporation earns tax credits (like research credits or energy credits) but can't use them all in the current year due to tax limitations.
4. Claim of Right Adjustment: When your corporation had to repay income previously reported and taxed, you may be entitled to a refund under special IRS rules.

The key advantage of Form 1139 over the standard amended return (Form 1120X) is speed. The IRS must process your application and issue any tentative refund within 90 days, making it particularly valuable when your business needs cash flow relief quickly. IRS.gov

When You’d Use Form 1139 (Late Filing & Amended Situations)

Strict Deadline: You must file Form 1139 within 12 months from the end of the tax year in which the loss, unused credit, or adjustment occurred. For a corporation with a calendar year ending December 31, 2022, that means the form must reach the IRS by December 31, 2023. Miss this deadline, and your only option is the slower Form 1120X process.

Critical Filing Rule: Before filing Form 1139, you must have already filed (or file simultaneously) your corporation's income tax return for the loss year. The IRS won't process a tentative refund application if they don't have your actual tax return on file. This is a common oversight that delays processing.

Late or Amended Filing Scenarios:

If you missed the 12-month window for Form 1139, don't panic – you still have options. You can file Form 1120X (amended corporate return) instead. While Form 1120X doesn't guarantee the 90-day processing, it gives you up to 3 years from the original return due date to claim your refund. The trade-off is time: Form 1120X can take 6 months or longer to process, and if the IRS doesn't act within 6 months, you have the right to file suit in court.

When You Can't Use Form 1139:

For tax years 2022 and beyond (years beginning after December 31, 2020), you cannot use Form 1139 for standard NOL carrybacks because Congress eliminated most NOL carrybacks starting in 2021. The only exceptions are:

• Farming losses (eligible for a 2-year carryback)
• Losses from insurance companies (not life insurance companies) IRS.gov

Key Rules or Details for 2022

Major Change Alert: The rules changed significantly for losses arising in tax years beginning after December 31, 2020 (which includes the 2022 calendar year for most corporations).

NOL Carryback Mostly Eliminated: For 2022 losses, the general NOL carryback provision is gone. This means most corporations with 2022 NOLs can only carry them forward to future tax years – not backward for a quick refund. However, two important exceptions remain:

1. Farming Losses: Agricultural businesses can still carry back farming losses for 2 years. A farming loss is defined as the smaller of: (a) your total NOL for the year, or (b) the NOL amount attributable only to your farming business operations.
2. Insurance Company Losses: Insurance companies (other than life insurance) can carry back NOLs for 2 years and can carry them forward for up to 20 years.

Net Capital Loss Rules: The 3-year carryback for net capital losses remains intact for 2022. If your corporation sold capital assets at a loss that exceeded capital gains, you can carry that net capital loss back 3 years and forward 5 years.

General Business Credit: Unused general business credits can typically be carried back 1 year and forward for 20 years. This rule didn't change for 2022.

The 80% Taxable Income Limitation: For tax years beginning after December 31, 2020, there's an important cap on NOL deductions. When you carry forward NOLs from 2018 or later to your 2022 return, the total NOL deduction generally cannot exceed 80% of your taxable income (calculated without the NOL deduction, section 199A deduction, or section 250 deduction). Insurance companies (except life insurance) are exempt from this 80% cap. IRS.gov

Foreign Tax Credit Limitation: You cannot use Form 1139 to carry back foreign tax credits that were released by an NOL or capital loss carryback. Those require Form 1120X instead.

Step-by-Step (High Level)

Step 1: Prepare Your Loss Year Return

Before touching Form 1139, complete and file your corporation's regular income tax return (Form 1120) for the year with the loss or unused credit. Calculate your NOL, net capital loss, or unused credit amount precisely. This return must be filed by its due date (or by the time you file Form 1139).

Step 2: Gather Required Attachments

Form 1139 requires substantial documentation. You'll need to attach:

• The first two pages of your loss year tax return
• All schedules that generated the carryback (Schedule D for capital losses, Form 3800 for business credits, etc.)
• Any Forms 8886 (Reportable Transaction Disclosure Statement) that were attached to your return
• Copies of amended schedules for each carryback year showing the recomputed figures

Step 3: Complete Form 1139

Work through the form systematically. Line 1 identifies what you're carrying back (NOL, capital loss, credit, or other). Lines 11-28 contain the heart of the form: side-by-side columns showing your tax calculation "before" and "after" the carryback for each year you're applying the loss to. You'll refigure income tax, alternative minimum tax (for pre-2018 years), and any other applicable taxes.

Step 4: Calculate Your Refund

The difference between tax paid originally and tax owed after the carryback equals your tentative refund. Line 31 shows the total decrease in tax across all carryback years, which becomes your requested refund.

Step 5: File Separately (Not With Your Return)

This is crucial: Do not attach Form 1139 to your corporate income tax return. Mail it separately to the IRS Service Center where you normally file your return. The form includes a dedicated address section.

Step 6: Wait for Processing

The IRS will review your application within 90 days from the later of: (a) the date you file the complete application, or (b) the last day of the month that includes your loss year return's due date (including extensions). IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Filing Form 1139 When It Doesn't Apply

Many corporations file Form 1139 for 2022 NOLs without realizing the carryback was eliminated. Solution: First confirm your NOL qualifies as a farming loss or insurance company loss. Otherwise, you can only carry it forward – no Form 1139 needed.

Mistake #2: Missing the 12-Month Deadline

The clock starts ticking the day after your tax year ends. Solution: Mark your calendar for 11 months after year-end as a hard deadline. Build in buffer time for preparation.

Mistake #3: Filing Before the Original Return

The IRS cannot process Form 1139 if they haven't received your loss year return. Solution: File your regular Form 1120 first (or simultaneously with Form 1139 in separate envelopes). Keep proof of filing.

Mistake #4: Incomplete Attachments

Forms missing required schedules get delayed or rejected. Solution: Use the IRS checklist in the instructions. Include all pages of Form 1120, all relevant schedules, and recomputed figures for carryback years. Make copies for your records.

Mistake #5: Mathematical Errors in the Side-by-Side Columns

Lines 11-28 require recalculating multiple years' taxes. Small errors multiply. Solution: Use tax software when possible. Double-check every calculation. Have a second person review the math. Remember that the IRS can disallow the entire application for material math errors.

Mistake #6: Forgetting to Attach Form 2848 (Power of Attorney)

If you want the IRS to communicate with your tax professional about the application, you must attach a current Form 2848. Solution: Include Form 2848 with Form 1139 if your accountant or attorney will handle IRS correspondence.

Mistake #7: Not Understanding "Tentative" Means "Subject to Review"

The refund isn't final. The IRS can audit and reverse it later. Solution: Maintain complete documentation. Be prepared to defend your calculations if the IRS follows up years later. Interest applies to any erroneous refunds you must repay.

What Happens After You File

The 90-Day Clock: Once the IRS receives your complete Form 1139 and your loss year return is on file, they have 90 days to process the application. This timeline is mandatory, which is why Form 1139 is so valuable for corporations needing quick cash flow.

Three Possible Outcomes:

1. Approved: The IRS agrees with your calculations and issues a tentative refund check. For refunds of $1 million or more per carryback year, you can request electronic deposit by attaching Form 8302. The money arrives, typically within the 90-day window.
2. Disallowed: The IRS rejects the application due to material omissions or math errors that aren't corrected within 90 days. Important limitation: if Form 1139 is disallowed, you cannot sue over the disallowance. Your only recourse is filing Form 1120X as a formal claim for refund.
3. Partial Approval: The IRS may approve part of your claim and deny part, adjusting the refund amount accordingly.

It's Not Over When the Check Arrives: Receiving your refund doesn't mean the IRS has accepted your application as correct. The refund is "tentative" – think of it as conditional approval. The IRS reserves the right to:

• Audit the application later
• Assess penalties if deductions or credits were overstated due to negligence, disregard of rules, or substantial understatement
• Charge interest on amounts erroneously refunded

Excessive Refund Recovery: If the IRS later determines the refund was too large, they'll bill you as if it were a math or clerical error on a return. This gives them streamlined collection authority.

Communication: If the IRS needs more information, they'll contact the person listed on Form 1139 (or your designated representative if Form 2848 was attached). Respond promptly to any inquiries to avoid delays or disallowance. IRS.gov

FAQs

Q1: Can I e-file Form 1139?

No. As of 2022, Form 1139 must be filed by mail. Send it to the same IRS Service Center where you file your corporate income tax return, but mail it separately (not attached to Form 1120).

Q2: What's the difference between Form 1139 and Form 1120X?

Form 1139 is faster (90-day processing) but more limited in scope and provides only a "tentative" refund. Form 1120X is slower (6+ months) but gives you more time to file (3 years vs. 12 months), covers more situations, and results in a final determination you can take to court if denied. Form 1139 denials cannot be litigated directly.

Q3: Can I carry back my 2022 NOL if I'm not a farm or insurance company?

No. For most corporations, 2022 NOLs can only be carried forward indefinitely to future years. The carryback was repealed for tax years beginning after December 31, 2020, except for farming losses and certain insurance company losses.

Q4: How far back can I carry a 2022 net capital loss?

Three years. A net capital loss from 2022 can be carried back to 2019, 2020, and 2021, in that order. Any remaining loss carries forward up to 5 years.

Q5: What if I made an election to waive the carryback period?

If you checked the box on Schedule K of Form 1120 to elect out of the carryback period, that election is irrevocable. You cannot later file Form 1139 to carry that loss back. The loss can only be carried forward.

Q6: Do I need to amend returns for the carryback years?

No. Form 1139 itself serves as the request to apply the loss to prior years. You don't separately file Form 1120X for those carryback years. However, you must attach recomputed schedules showing the tax calculation changes.

Q7: What happens to my refund if the corporation closes or merges?

For consolidated groups, refunds go to the common parent corporation even if the loss originated in a subsidiary. If your corporation ceased to exist through a merger or dissolution, consult a tax professional about successor liability and refund rights – the rules are complex and depend on the type of transaction. IRS.gov

Additional Resources:

• Download Form 1139 and current instructions: IRS Form 1139 Page
• IRS Service Center addresses: Where to File Form 1120
• Corporate tax questions: Call 1-800-829-4933 (business tax line)

This guide is for informational purposes only and does not constitute tax advice. Consult with a qualified tax professional for guidance specific to your corporation's situation.

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