When your corporation experiences a financial loss or has unused tax credits, you don't have to wait years to get money back from the IRS. Form 1139 is designed to help corporations get a "quick refund" by applying losses or credits from the current year to previous profitable years. Think of it as a fast-track way to turn your bad year into immediate cash flow relief.

What the Form Is For

Form 1139 is specifically designed for corporations (except S corporations) to apply for an expedited tax refund. This isn't your typical refund—it's a "tentative refund" that the IRS processes much faster than a regular amended return.

You can use Form 1139 to get money back when you have:

Net Operating Losses (NOLs): When your business deductions exceed your income for the year, you have an NOL. Instead of just carrying it forward to future years, you can "carry it back" to years when you made money and paid taxes, essentially getting a do-over on those tax returns.

Net Capital Losses: If your corporation sold capital assets (like stocks or property) at a loss that exceeds your capital gains, you can carry that loss back to offset previous capital gains.

Unused General Business Credits: Maybe you qualified for tax credits (like research credits or energy credits) but couldn't use them all because your tax liability wasn't high enough. You can carry these unused credits back to years when you had more tax liability.

Claim of Right Adjustments: In rare situations where you had to return income you previously reported (under section 1341(b)(1)), you can get a refund for the taxes you paid on that income.

The beauty of Form 1139 is speed. The IRS is required to process it within 90 days, compared to the much longer wait for regular amended returns. IRS.gov

When You'd Use It (Including Late and Amended Situations)

Timing is critical with Form 1139. You generally must file it within 12 months of the end of the tax year in which the loss or unused credit occurred. For example, if your corporation had a loss in the 2012 calendar year, you'd need to file Form 1139 by December 31, 2013.

Important deadline: You must file your corporate income tax return for the loss year before or at the same time as you file Form 1139. You cannot file Form 1139 before filing your actual tax return. IRS.gov

The Alternative—Form 1120X: If you miss the 12-month window, you haven't necessarily lost your opportunity for a refund. You can file Form 1120X (Amended U.S. Corporation Income Tax Return) instead. However, there are significant differences:

• Form 1120X gives you more time—generally three years from when you filed the original return
• The IRS is not required to process it within 90 days (often taking six months or more)
• You can challenge an IRS disallowance of Form 1120X in court; you cannot do this with Form 1139
• You must use Form 1120X (not Form 1139) if you're releasing foreign tax credits due to a carryback

When to amend: If the IRS disallows your Form 1139 or you discover errors after filing, you can still file Form 1120X as a regular refund claim to preserve your rights.

Key Rules or Details for 2012

Standard NOL Carryback

Most net operating losses could be carried back 2 years. Any unused loss after the carryback could be carried forward up to 20 years. IRS.gov

Extended Carryback Periods

Certain special losses qualified for longer carryback periods:

• Farming losses: 5-year carryback
• Qualified disaster losses: 5-year carryback (for federally declared disasters before January 1, 2010)
• Gulf Opportunity Zone (GO Zone) losses: 5-year carryback
• Specified liability losses: 10-year carryback (losses from product liability, environmental remediation, workers' compensation, etc.)
• Eligible losses for small businesses: 3-year carryback (related to federally declared disasters)

General Business Credit Carryback

Unused general business credits typically carried back 1 year, except for eligible small business credits under the Small Business Jobs Act of 2010, which carried back 5 years. IRS.gov

Net Capital Loss Carryback

Capital losses carried back 3 years and were treated as short-term capital losses in the carryback year.

Waiving Carrybacks

Corporations could elect to waive the carryback period and only carry losses forward. This election had to be made on a timely filed return and was irrevocable.

Consolidated Groups

Special rules applied for consolidated groups, with refunds going to the common parent even if the loss originated in a subsidiary's separate return year.

Step-by-Step (High Level)

Step 1—Prepare Your Loss Year Return

File (or prepare to file) your corporation's income tax return for the year with the loss or unused credit. You cannot file Form 1139 before this return is filed.

Step 2—Identify Carryback Years

Determine which prior years you'll apply the loss or credit to. You must start with the earliest year in the carryback period and work forward. For a standard 2-year NOL carryback from 2012, you'd apply it first to 2010, then any remaining loss to 2011.

Step 3—Gather Documentation

Collect copies of:

• The first two pages of your 2012 corporate tax return
• All forms and schedules related to the loss or credit (Schedule D for capital losses, Form 3800 for general business credits, etc.)
• Original returns for all carryback years
• Any statements showing elections you made
• All carryback year forms showing how you refigured the numbers

Step 4—Recalculate Prior Years

For each carryback year, recalculate the taxable income and tax liability as if the loss or credit had been available in that year. This means:

• Reducing taxable income by the NOL carryback
• Reducing capital gains by the capital loss carryback
• Reducing tax liability by credit carrybacks
• Refiguring alternative minimum tax if applicable

Step 5—Complete Form 1139

Fill out the form showing:

• The amount of loss or credit being carried back
• Calculations for each carryback year (before and after applying the carryback)
• The decrease in tax for each year
• The total refund or credit you're requesting

Step 6—File Separately

Mail Form 1139 to the IRS Service Center where you file your regular corporate returns. Do not attach it to your corporate income tax return—it must be filed as a separate document. IRS.gov

Step 7—Wait for Processing

The IRS has 90 days from the later of (a) when you file the complete application or (b) the last day of the month containing your tax return due date (including extensions).

Common Mistakes and How to Avoid Them

Mistake #1: Filing Form 1139 Before the Tax Return

The IRS will reject your application if you file it before filing your corporate return for the loss year. Always file the tax return first.

Mistake #2: Missing Attachments

Form 1139 requires extensive documentation. An application with "material omissions" will be disallowed without the opportunity for court review. Create a checklist of all required attachments and verify you've included everything.

Mistake #3: Math Errors

Since the IRS can disallow applications with uncorrected math errors within 90 days, double-check all calculations. Have a second person review your numbers before filing.

Mistake #4: Applying Carrybacks to Wrong Years or Wrong Order

NOLs must be applied to the earliest year first in the carryback period. You cannot skip a year or apply it out of sequence. For a 2-year carryback from 2012, you must apply to 2010 first, even if 2011 had higher income. IRS.gov

Mistake #5: Failing to Consider Alternative Minimum Tax

When recalculating prior year taxes, don't forget to refigure the alternative minimum tax. Attach Form 4626 for each carryback year showing the recalculated AMT.

Mistake #6: Not Understanding "Tentative" Means Temporary

Receiving your refund doesn't mean the IRS has accepted it as correct. The IRS can later examine the refund and assess additional taxes, penalties, and interest if they determine it was erroneous. Keep all documentation.

Mistake #7: Missing the 12-Month Deadline

The 12-month filing deadline is firm for Form 1139. If you miss it, you'll need to use Form 1120X instead, losing the 90-day processing advantage.

Mistake #8: Incorrect Carryback Period

Different types of losses have different carryback periods. Make sure you're using the correct period for your specific situation (2 years for standard NOLs, 5 years for farming losses, etc.).

What Happens After You File

Processing Timeline

The IRS must process your Form 1139 within 90 days from the later of when you file the complete application or the due date (including extensions) of your tax return for the loss year. In practice, the IRS aims to meet this deadline, though processing times can vary. IRS.gov

Receiving Your Refund

If approved, the IRS will issue a refund check or direct deposit. The refund amount equals the decrease in taxes from the carryback years. For consolidated groups, the refund goes to the common parent corporation.

Not a Final Determination

Receiving your tentative refund doesn't mean the IRS has accepted your application as correct. It's called "tentative" for a reason—the IRS reserves the right to examine the refund claim later. This is different from a refund based on Form 1120X, which is a formal claim you can litigate.

Potential Disallowance

The IRS may disallow your application in whole or in part if it contains material omissions or uncorrected math errors. If disallowed, you cannot sue in court to challenge the disallowance. However, you can file Form 1120X as a regular refund claim to preserve your legal rights.

Interest and Recapture

If the IRS later determines the refund was excessive (due to overstated deductions, negligence, or substantial understatement), they will:

• Assess the excess as if it were a math error on the original return
• Charge interest from the date the refund was issued
• Potentially assess penalties for negligence or substantial understatement

Follow-Up Communication

The IRS may contact you or your authorized representative (if you attached Form 2848, Power of Attorney) for additional information during processing. Respond promptly to avoid delays or disallowance.

If You Disagree

Since Form 1139 disallowances cannot be challenged in court, your recourse is to file Form 1120X for the same carryback years as a formal refund claim. This gives you legal rights to appeal and litigate if necessary.

FAQs

Q1: Can I use Form 1139 if my corporation is under IRS audit?

Yes. You can file Form 1139 even when the carryback year is currently under audit. The tentative refund will be processed separately from the audit, though the IRS may later adjust it based on audit findings.

Q2: What's the difference between Form 1139 and Form 1120X for getting a refund?

Form 1139 is faster (90-day processing) but gives you fewer legal rights—you cannot sue if it's disallowed. Form 1120X takes longer (typically 6+ months) but is a formal refund claim you can litigate. Form 1139 is available only within 12 months of the loss year end; Form 1120X has a 3-year statute of limitations.

Q3: Do I need to file Form 1139 if I just want to carry my loss forward instead of back?

No. If you want to waive the carryback period and only carry losses forward, you don't file Form 1139. Instead, attach an election statement to your timely filed tax return for the loss year stating you're waiving the carryback period under section 172(b)(3). IRS.gov

Q4: Can S corporations use Form 1139?

No. Form 1139 is specifically for C corporations, life insurance companies, and other corporate entities. S corporations cannot use this form because losses flow through to shareholders' individual returns.

Q5: What if my corporation is part of a consolidated group?

Special rules apply. The common parent files Form 1139 for the consolidated group. If a subsidiary had a loss in a separate return year before joining the group, and that loss is carried back to a consolidated return year, the refund still goes to the common parent of the carryback year, not the subsidiary. IRS.gov

Q6: Can I fax Form 1139 to the IRS?

Generally, Form 1139 should be mailed to the IRS Service Center where you file your corporate returns. The IRS has allowed faxing during special circumstances (such as during the COVID-19 pandemic), but check current IRS guidance for the most up-to-date filing methods.

Q7: What happens if I made a mistake on my filed Form 1139?

If the IRS hasn't processed it yet, you can file a corrected Form 1139. If they've already issued the refund, you should file Form 1120X for the affected years to correct the error. You cannot amend Form 1139 itself after the refund is issued.

Sources: All information is sourced from official IRS publications including the Instructions for Form 1139 (Rev. December 2012) and About Form 1139 from IRS.gov. For the most current information and future developments, visit IRS.gov/form1139.