What Form 1139 Is For
Form 1139 is the tax form from the Internal Revenue Service that allows corporations to request a quick refund when losses or unused credits occur in a given tax year. A corporation files this form to apply for a tentative refund after reporting a net operating loss, a net capital loss, an unused general business credit, or a claim of right adjustment. The purpose is to enable corporations to recover overpaid taxes more quickly than through an amended return, providing much-needed cash flow relief.
When You’d Use Form 1139
A corporation application for a tentative refund is filed within 12 months after the end of the taxable year in which the adjustment arose. Corporations use it when losses are incurred or credits remain unused and can be carried back to prior tax years to reduce tax liabilities. The corporation’s income tax return for the loss year must be completed and filed before or with this application to ensure eligibility for the refund.
Key Rules or Details for 2020
- Five-Year NOL Carryback Rules: For tax years beginning after 2017 and before 2021, corporations could carry a net operating loss back five years to apply against earlier income, producing a refund.
- Net Capital Loss Treatment: A corporation that computed a net capital loss for 2020 could carry it back three years, reducing taxable income from prior profitable years.
- General Business Credit Use: Unused general business credits could be carried back one year to offset past tax liabilities, improving liquidity for corporations.
- Adjustment Under Section 1341: If an adjustment arose from a claim of right adjustment, the taxpayer could use Form 1139 to request a tentative refund for taxes previously overpaid.
- Excluded Entities: Life insurance companies and S corporations were not eligible to file this form and must follow separate procedures.
- Filing Address: The completed form is filed at the Internal Revenue Service Center, where the corporation files its regular tax return.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Determine Eligibility
Confirm that your corporation meets the filing criteria. Corporations must have a valid loss year with an NOL, a net capital loss, or an unused credit that can be carried back to one or more previous tax years.
Step 2: Identify Carryback Period
Identify which earlier taxable years the loss or credit will apply to. Under the 2020 NOL carryback rules, the loss could be carried back up to five years to offset prior income.
Step 3: Gather Required Information
Collect all information required to complete the form. Attach schedules and forms that show computations, deductions, and credits. Make sure the corporation’s income tax return is completed before entering information on Form 1139.
Step 4: Complete and File the Form
Enter information accurately on the appropriate lines. Attach supporting forms, include all computations, and sign under penalties of perjury. Apply separately from your corporation’s income tax return at the appropriate Internal Revenue Service Center.
Step 5: Await Processing
Once filed, the IRS reviews the application for completeness. The Service processes quick refund claims within 90 days of the filing date, provided all details are correctly attached and computed.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Filing Before the Tax Return Is Completed: Many taxpayers file before the corporation’s income tax return for the previous year is finished. To avoid rejection, ensure the return is filed or filed simultaneously with Form 1139.
- Missing the 12-Month Deadline: The form must be filed within 12 months of the close of the tax year in which the adjustment arose. Mark the filing date on your calendar to avoid late submission penalties.
- Incorrect Computation of Carrybacks: Errors in how losses are carried to earlier tax years can delay processing. To prevent this, double-check all calculations and ensure losses are applied starting with the earliest year for which data is available.
- Incomplete Attachments: Missing schedules, lines, or details can cause delays. Always attach all required computations and forms before submission.
- Using the Wrong Entity Form: S corporations and life insurance companies should not file this form. Confirm your corporation’s eligibility before preparing the application.
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 the corporation files its application for a tentative refund, the IRS reviews the claim and may request additional information. Once approved, a refund or credit is issued to the taxpayer, usually within 90 days. The tentative refund is treated as provisional, and the IRS can later examine the application or adjust amounts if errors are discovered. If the refund is disallowed, corporations may file a formal amended return to claim the overpayment instead.
FAQs
Who can file IRS Form 1139 (2020) for a tentative refund?
Only C corporations that experienced a net operating loss, a net capital loss, or an unused credit for the 2020 tax year may file this form for a tentative refund.
What are the NOL carryback rules for IRS Form 1139 (2020)?
The 2020 NOL carryback rules allowed corporations to carry losses back five years to offset income in earlier tax years, reducing total taxes owed.
Can I claim a general business credit using Form 1139?
Yes, a corporation can claim an unused general business credit by carrying it back one year to reduce prior tax liabilities under the Internal Revenue Code.
How does a claim of right adjustment affect my application?
An adjustment under Section 1341 applies when income previously taxed must be repaid. Corporations can use this adjustment to claim overpayment of tax on Form 1139.
Can a corporation file IRS Form 1139 for a net capital loss?
A corporation that incurred a net capital loss can apply the loss to previous taxable years, generating a refund for overpaid tax.
What happens if my corporation’s overpayment of tax is disallowed?
If the tentative refund claim is denied, the corporation can later file Form 1120X, an amended income tax return, to formally request the refund.
How should a corporation complete Form 1139 to ensure accuracy?
Corporations must enter information carefully, compute each adjustment correctly, and attach all schedules showing how the loss or credit was carried and computed.
