What Form 1139 Is For

Form 1139 is the IRS's fast-track refund application for corporations (excluding S corporations) that want their money back quickly when certain tax situations work in their favor. Think of it as an express lane for corporate tax refunds.

Corporations use this form to request tentative (quick) refunds when they have:

• Net Operating Losses (NOLs) – When business deductions exceed income in a given year, creating a loss that can be ""carried back"" to offset profits from previous profitable years
• Net Capital Losses – Losses from selling capital assets that can be applied to previous years with capital gains
• Unused General Business Credits – Tax credits the company couldn't use in the current year but can apply to a prior year
• Claim of Right Adjustments – Situations where a company had to repay income it previously reported and paid taxes on

The key advantage of Form 1139 over filing an amended return (Form 1120X) is speed: the IRS must process it within 90 days, whereas regular amended returns have no such deadline. For businesses experiencing cash flow challenges—particularly relevant during the 2020 pandemic period—this expedited refund can provide crucial financial relief. IRS.gov

When You’d Use Form 1139

Standard Filing Deadline

You must file Form 1139 within 12 months after the end of the tax year in which the loss or unused credit arose. For example, if your corporation had an NOL in the 2020 calendar year, you'd need to file Form 1139 by December 31, 2021.

Important 2020 Extension

Due to the CARES Act's changes to NOL carryback rules, the IRS granted special relief through Notice 2020-26. Corporations with NOLs arising in tax years beginning during calendar year 2018 and ending on or before June 30, 2019, received a six-month extension beyond the normal 12-month deadline to file Form 1139. This extension applied specifically to NOL carrybacks, not other items. IRS.gov

Critical Timing Rule

Your corporation must file its income tax return for the loss year no later than the date you file Form 1139—you cannot file Form 1139 first.

Late Filing Considerations

Unlike amended returns, Form 1139 has strict deadlines. If you miss the 12-month window (plus any applicable extensions), the IRS will reject your tentative refund application. You'll then need to file Form 1120X (amended corporate return) instead, which has a longer three-year statute of limitations but lacks the 90-day processing guarantee.

Form 1139 vs. Form 1120X

While both can result in refunds, they serve different purposes. Form 1139 is specifically for tentative refunds with expedited processing but stricter filing requirements. Form 1120X handles all types of corrections and has more flexible deadlines but may take significantly longer to process—sometimes over a year.

Key Rules or Details for 2020

The year 2020 saw dramatic changes to NOL carryback rules through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, making Form 1139 particularly valuable:

Five-Year Carryback Period

The CARES Act temporarily restored and extended NOL carrybacks. For NOLs arising in tax years beginning after December 31, 2017, and before January 1, 2021 (which includes most 2020 losses), corporations could carry losses back five years instead of the zero-year carryback that had been in effect. This meant a 2020 loss could offset income from 2015, 2016, 2017, 2018, and 2019, potentially generating substantial refunds. IRS.gov

Section 965 Complications

If your corporation had transition tax inclusions under Section 965 (related to the 2017 Tax Cuts and Jobs Act's deemed repatriation of foreign earnings) during the carryback period, special rules applied. You could elect to exclude those ""Section 965 years"" from the carryback period to avoid complications. However, if you did carry back to a Section 965 year, you were deemed to have made a Section 965(n) election, which limited how much loss could be applied to that year.

Waiver Elections

Corporations could elect to waive the five-year carryback period entirely and instead carry the NOL forward indefinitely. For 2018 and 2019 losses, this election had to be made by the extended due date for filing the corporation's return for its first tax year ending after March 27, 2020. The election was irrevocable once made. IRS.gov

Processing Timeline

The IRS committed to processing complete Form 1139 applications within 90 days of the later of: (1) the date you filed the complete application, or (2) the last day of the month including the due date for filing your corporate return for the loss year.

No 80% Limitation for 2020

For tax years beginning before January 1, 2021, the NOL deduction wasn't subject to the 80% taxable income limitation that would later apply to post-2020 years.

Step-by-Step (High Level)

Step 1: Determine Eligibility and Calculate Your Loss

Before starting, confirm your corporation (not an S corporation) has a legitimate NOL, net capital loss, or unused credit. Calculate the exact amount using your 2020 return. For NOLs, this means your deductions exceeded gross income, with specific adjustments (no NOL deduction from other years, modified dividends-received deductions, no Section 199A deduction).

Step 2: Identify Carryback Years

Determine which prior years you'll carry the loss back to. For 2020 NOLs, you could go back up to five years (2015-2019). Unless you elected otherwise, losses must be applied to the earliest year first, then sequentially to later years until absorbed or exhausted.

Step 3: Gather Required Documentation

Form 1139 requires extensive attachments:

• The first two pages of your 2020 corporate income tax return
• Forms and schedules creating the carryback (Schedule D for capital losses, Form 3800 for business credits)
• Any reportable transaction disclosure statements (Form 8886)
• Election statements if waiving carrybacks or excluding Section 965 years
• Refigured forms for each carryback year showing tax before and after the adjustment
• Form 8302 for any carryback year with refunds of $1 million or more

Step 4: Complete Form 1139

Fill out the form systematically:

• Part I: Enter the amounts being carried back (NOL, net capital loss, etc.)
• Parts II-IV: Show the computation of decreased tax for each carryback year in paired columns (before/after)
• Refigure income tax, credits, and other taxes for each affected year

Step 5: File Separately from Your Return

Form 1139 is not attached to your corporate return—file it separately with the same IRS Service Center where you file your regular return. Do not combine it with Form 1120.

Step 6: Wait for Processing

The IRS has 90 days to process your application. During this time, they may contact you or your representative for clarification. Designate a power of attorney by attaching Form 2848 if you want someone else to handle IRS communications.

Step 7: Understand It's Tentative

Receiving payment doesn't mean the IRS has accepted your application as correct. They reserve the right to examine the refund later and assess penalties if they find overstatements, negligence, or substantial understatements.

Common Mistakes and How to Avoid Them

Mistake #1: Filing Form 1139 Before the Tax Return

Many corporations rush to file Form 1139 as soon as they realize they have a loss, before filing their actual tax return for the loss year. The IRS instructions explicitly state your income tax return must be filed no later than the date you file Form 1139. Solution: Always file your corporate return first, or simultaneously.

Mistake #2: Material Omissions or Math Errors

The IRS can summarily disallow your application if it contains material omissions or mathematical errors that aren't corrected within the 90-day processing period. Unlike regular refund claims, you cannot sue in court to challenge a disallowance of Form 1139. Solution: Triple-check all calculations and attachments before filing. Consider having a tax professional review the form.

Mistake #3: Incorrect Carryback Order

Unless you made a specific election, NOLs must be carried back to the earliest year first, then sequentially forward through subsequent years. Skipping years or applying losses out of order will result in rejection. Solution: Follow the mandatory ordering rules, applying the loss to 2015 first for a 2020 loss, then 2016, 2017, 2018, and finally 2019.

Mistake #4: Missing Section 965 Elections

Corporations with Section 965 transition tax issues that carry back losses without addressing these complexities face significant problems. Carrying back to a Section 965 year triggers deemed elections with unexpected consequences. Solution: Review whether any carryback years were Section 965 years. If so, consider making an election to exclude those years from the carryback period, and attach the required election statement.

Mistake #5: Incomplete Documentation

Failing to attach all required schedules, forms, and recomputations is a common reason for IRS inquiries that delay processing beyond 90 days. Solution: Use the IRS's ""What to Attach"" checklist from the Form 1139 instructions. Include refigured tax computations for all carryback years and all relevant forms from both the loss year and carryback years.

Mistake #6: Wrong Form (1139 vs. 1045)

Some taxpayers accidentally file Form 1045 (for individuals, estates, and trusts) instead of Form 1139 (for corporations). Solution: Confirm your entity type. Only C corporations use Form 1139; S corporations, partnerships, individuals, estates, and trusts use different forms or procedures.

Mistake #7: Missing the 12-Month Deadline

The tentative refund option expires 12 months after the end of the loss year (plus any IRS-granted extensions). Missing this deadline means losing the fast-track processing. Solution: Calendar the deadline immediately upon determining you have a carryback situation. For 2020 calendar-year corporations, the standard deadline was December 31, 2021.

What Happens After You File

Immediate Acknowledgment

The IRS doesn't typically send an acknowledgment upon receiving Form 1139. You may want to use certified mail with return receipt to prove timely filing.

90-Day Clock Starts

The IRS begins its 90-day processing period from the later of: (1) when you filed a complete application, or (2) the last day of the month that includes your corporate return's due date (including extensions) for the loss year.

IRS May Request Information

During processing, the IRS may contact you or your designated representative (if you attached Form 2848) for clarification or additional documentation. Respond promptly—delays can extend processing time beyond 90 days.

Tentative Refund Issued

If approved, the IRS issues the refund, typically via direct deposit if you completed Form 8302 for refunds of $1 million or more, or by check for smaller amounts. The refund includes any overpayment from the carryback year(s).

Tentative Means Provisional

The word ""tentative"" is crucial—receiving payment doesn't mean the IRS agrees with your position. The Service explicitly reserves the right to examine the matter later. It's an advance payment while they continue reviewing.

Future Examination Possible

The IRS can audit the carryback years and the loss year. If they later determine your refund was excessive due to overstatement of losses, negligence, disregard of rules, or substantial understatement, they can:

• Assess the refund back as if it were due to a math or clerical error
• Charge interest on erroneously refunded amounts
• Impose penalties for negligence or substantial understatements

No Court Challenge for Disallowance

If the IRS disallows your Form 1139 application (either entirely or partially), you cannot file suit in court to challenge that specific disallowance. However, you're not without recourse—you can file Form 1120X (amended return) as a formal claim for refund, which does provide litigation rights if the IRS denies it.

Impact on Future Years

The refund from earlier years may affect tax attributes (like credit carryovers, charitable contribution carryovers, or foreign tax credit positions) in subsequent years. You may need to file amended returns for intervening years to reflect these changes.

Interest on Refunds

The IRS pays interest on tentative refunds from the date of overpayment to a date determined under Section 6611. This interest is taxable income in the year received.

FAQs

Q1: Can I use Form 1139 for my S corporation?

No. Form 1139 is specifically for C corporations. S corporations generally don't carry back losses at the entity level because losses pass through to shareholders, who then apply them on their individual returns.

Q2: What's the advantage of Form 1139 over just filing an amended return (Form 1120X)?

Speed and certainty. The IRS must process Form 1139 within 90 days, providing relatively quick cash flow relief. Form 1120X has no guaranteed processing timeline and can take a year or more. However, Form 1120X has more flexible filing deadlines (three years instead of 12 months) and can be used for any type of correction, not just carrybacks.

Q3: Can I carry back my 2020 loss if I already elected to waive carrybacks on my 2020 tax return?

No. Elections to waive the carryback period are irrevocable. If you checked the box on Form 1120, Schedule K, line 11, waiving the carryback for 2020, you cannot later file Form 1139 to carry that loss back. The CARES Act did not provide a mechanism to revoke such elections for 2018, 2019, or 2020 losses (though limited revocation was available for certain 2017 fiscal year losses).

Q4: My corporation had transition tax under Section 965 in 2017. Can I carry my 2020 loss back to 2017?

Technically yes, but it's complicated. Carrying an NOL back to a Section 965 year triggers a deemed Section 965(n) election, which limits the loss deduction to income in excess of your Section 965(a) inclusion (net of the Section 965(c) deduction). Additionally, if you made a Section 965(h) election to pay the transition tax in installments, you won't receive a refund unless the credit from the NOL exceeds your entire unpaid Section 965 tax liability. Many taxpayers elect to exclude Section 965 years from the carryback period to avoid these complications. IRS.gov

Q5: What happens if I make a mistake on Form 1139?

It depends on the type of mistake. Material omissions or math errors that aren't corrected within the 90-day processing period result in disallowance, with no right to sue in court over that disallowance. However, you can then file Form 1120X as a formal claim for refund with full litigation rights. Minor errors may prompt IRS inquiries, potentially delaying processing beyond 90 days.

Q6: Can I e-file Form 1139?

As of 2020, Form 1139 generally must be filed by paper mail to the IRS Service Center where you file your corporate return. However, the IRS established temporary procedures during the COVID-19 pandemic allowing certain Forms 1139 to be faxed starting April 17, 2020, due to mail processing delays. Check the current IRS guidance for whether faxing remains an option.

Q7: How far back can I carry my 2020 NOL?

Under the CARES Act, NOLs arising in tax years beginning after December 31, 2017, and before January 1, 2021, can be carried back five years (unless you elected otherwise). For a calendar-year 2020 loss, that means you can carry it back to 2015, 2016, 2017, 2018, and 2019. This five-year carryback was temporary; for losses arising in tax years beginning after December 31, 2020, the carryback generally reverted to two years and only for farming losses and insurance companies (other than life insurance companies).

Sources: All information derived from official IRS resources including Form 1139 instructions (IRS.gov), About Form 1139 (IRS.gov), IRS Notice 2020-26, Revenue Procedure 2020-24, and IRS FAQs on NOL carrybacks (IRS.gov).