What Form 1139 (2018) Is For
IRS Form 1139 (2018) allows corporations to apply for a tentative refund of previously paid corporate income tax. It helps businesses recover taxes when they experience a net operating loss, an unused tax credit, or specific adjustments in the same or earlier tax years. By using this form, corporations can receive refunds more quickly—typically within 90 days, rather than waiting through the standard refund process.
Resident corporations, insurance companies, and other entities subject to corporate tax under the Internal Revenue Code may use this form. It is not available to S corporations or other pass-through entities such as partnerships. Corporations file Form 1139 for the 2018 tax year when losses or credits arose that affect prior-year taxable income.
When You’d Use Form 1139
Corporations use Form 1139 to apply for a tentative refund when they experience a net operating loss, unused tax credit, or certain farming losses that reduce taxable income. The form allows resident corporations to offset prior-year corporate income tax and recover funds quickly.
It must be filed within twelve months after the close of the tax year in which the loss or credit occurred. Corporations that miss this deadline can still claim refunds by filing Form 1120X, although they lose the 90-day expedited review.
Key Rules or Details for 2018
The 2018 tax year marks significant changes under the Tax Cuts and Jobs Act of 2017. Most corporations could no longer carry back a net operating loss except for certain farming losses and insurance companies. Other losses must be carried forward indefinitely to offset future profits.
Additionally, deductions based on loss carrybacks are limited to 80% of the adjusted taxable income. Capital gains and general business credits follow their own special rules, and the repeal of the corporate alternative minimum tax simplified refund calculations.
Learn more about federal tax filing through our IRS Form Help Center.
Step-by-Step (High Level)
Step 1: File the 2018 Corporate Tax Return.
The corporation must first complete and file its 2018 Form 1120 showing the loss or unused credit. Form 1139 cannot be filed until that return has been accepted.
Step 2: Determine the Applicable Carryback Years.
Identify which tax years qualify for the carryback. Most 2018 farming and insurance losses can be applied to 2016 and 2017, while unused business credits apply only to 2017.
Step 3: Gather Supporting Documentation.
Include copies of the first two pages of the 2018 return, the schedules showing the loss or credit, and recalculated returns for the carryback years. Proper documentation supports accurate refund computation.
Step 4: Complete Form 1139.
Provide the corporation’s identifying information, select the type of carryback, and compute the effect on taxable income, deductions, and corporate tax for each year affected.
Step 5: Verify All Calculations.
Ensure that each adjustment complies with the Internal Revenue Code and the 2018 tax law changes. Check that deductions, credits, and capital gains are applied accurately.
Step 6: Submit to the Correct Service Center.
Mail Form 1139 to the IRS Service Center where the corporation typically files its return. The 2018 form cannot be filed electronically and must be submitted separately from Form 1120.
Step 7: Select the Refund Method.
A corporation may request the refund as a paper check or choose direct deposit to a secure bank account or other financial institution for faster access to funds.
Common Mistakes and How to Avoid Them
Corporations frequently encounter refund delays or rejections when filing Form 1139 due to preventable errors. Understanding and avoiding these mistakes helps ensure accurate and timely processing.
- Filing Form 1139 before submitting the 2018 return: The IRS automatically rejects applications filed before the corporate income tax return is on record. File Form 1120 first or simultaneously.
- Missing the 12-month filing deadline: Tentative refund claims must be filed within 12 months after the end of the loss year. Late submissions are ineligible under Form 1139 procedures.
- Claiming nonpermitted carrybacks: For 2018, only certain farming losses qualify for carryback. Non-farming losses are not eligible under the current tax law.
- Making mathematical errors: Incorrect income or refund totals cause processing delays or adjustments. Verify all computations before submission.
- Exceeding the 80% limit on deductions: Deductions cannot exceed 80% of adjusted taxable income. Review calculations to ensure compliance with this cap.
- Using Form 1139 for Section 965 inclusion years: The IRS does not permit tentative refund claims for tax years affected by the Section 965 repatriation inclusion.
Careful preparation, timely filing, and accurate documentation help corporations avoid IRS rejections and expedite approval of Form 1139 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
The IRS generally processes Form 1139 within 90 days of receiving a complete application. Refunds are issued as a paper check or direct deposit to a secure bank account, depending on the method selected by the corporation.
The refund is considered tentative, meaning it may be reviewed and adjusted at a later time. If excess payments are found, the corporation must repay the amount, along with interest, in accordance with federal revenue laws and internal audit procedures.
FAQs
What is IRS Form 1139 (2018) used for?
IRS Form 1139 (2018) allows corporations to claim a tentative refund when taxable income decreases due to a net operating loss or unused tax credit. It helps corporations recover corporate income tax that they have previously paid, thereby improving their cash flow.
Who can file Form 1139 for the 2018 tax year?
Resident corporations and certain insurance companies may file Form 1139 to recover corporate tax payments. Pass-through entities, partnerships, and non-corporate taxpayers generally cannot use it because they report income under different U.S. tax and filing rules.
How do direct deposit and paper check options work for refunds?
Corporations can choose direct deposit to a secure bank account or financial institution for faster refunds. If no account is provided, the IRS sends a paper check. Each method ensures verified payment of federal revenue.
How did the Tax Cuts and Jobs Act affect Form 1139?
The Jobs Act introduced key aspects like limits on excess business losses, reduced corporate tax rates, and changes to net operating loss carrybacks. Most losses after 2017 must be carried forward indefinitely under the updated Internal Revenue Code.
Are there special rules for farming losses or capital gains?
Yes, certain farming losses may still be carried back two tax years, while capital gains and qualified business income follow separate deduction limits. These exceptions help businesses balance income, deductions, and investment returns across multiple tax years.
What are common tax benefits or deductions linked to Form 1139?
Corporations may claim deductions for depreciation, costs of goods sold, and other expenses that reduce taxable income. Such tax benefits support companies, improve their profits, and generate revenue for reinvestment, ultimately benefiting both owners and employees.
What happens if a corporation files after the due date?
If Form 1139 is filed late, the taxpayer must use Form 1120X instead. Refunds will take longer, and interest may accrue. Late submissions forfeit access to expedited tax refunds and other expedited review benefits.
