Form 1045 (2018) — Application for Tentative Refund
Purpose
Form 1045 permits individuals, estates, or trusts to apply for a quick refund of income tax attributable to a net operating loss, unused general business credit, or net section 1256 contracts loss carried back to prior years. Congress eliminated NOL carrybacks for tax years ending after December 31, 2017, through the Tax Cuts and Jobs Act.
Enacted in March 2020, the CARES Act retroactively allowed 2018, 2019, and 2020 NOLs to be carried back five years. This form reflects those modifications in its schedules and instructions.
Required Steps
Verify 2018 Tax Year Eligibility and Five-Year Carryback Period
Confirm the loss or credit originated in tax year 2018 and identify which prior years are available for carryback. Under CARES Act provisions enacted in March 2020, NOLs arising in 2018 can be carried back five years to 2013. You may elect to waive the carryback period or elect to exclude section 965 inclusion years from the five-year carryback period.
Prepare Schedule A—Computation of NOL (If Applicable)
Complete Schedule A (page 3) if carrying back an NOL. Lines 1–25 require detailed computation of taxable income before the NOL deduction, including section 1202 exclusion treatment.
Calendar year 2018 taxpayers cannot claim the domestic production activities deduction because the TCJA repealed it for tax years beginning after December 31, 2017. Capital loss limitations and business versus nonbusiness classifications must reflect the 2018 rules.
Calculate Itemized Deduction Adjustments for Carryback Years
If itemized deductions were claimed in the carryback year and the NOL carryback reduces taxable income, complete lines 11–38 (Adjustment to Itemized Deductions, page 4–5) for each affected carryback year. Include 2018 thresholds for medical expenses (7.5% AGI floor for 2018) and casualty losses from federally declared disasters (10% AGI floor plus $100 per casualty).
The TCJA suspended miscellaneous itemized deductions subject to the 2% floor for tax years 2018 through 2025. After expiring in 2017, the mortgage insurance premium deduction was retroactively extended to 2018–2020 by legislation passed in December 2019, requiring amended returns.
Identify Excess Advance Premium Tax Credit Repayment
On page 2, line 17, report any Excess Advance Premium Tax Credit repayment owed. This line applies to 2018 because advance payments may have been made in prior carryback years. Include any reconciliation of advance credits against actual credits on Form 8962 for the applicable carryback tax year.
Report Health Care Individual Responsibility Amount (If Any)
Complete line 28 (Health care: individual responsibility) on page 2. The individual shared responsibility payment under ACA section 5000A applied to 2018 tax years with a maximum penalty of $695 per adult or 2.5% of income over the filing threshold, whichever was greater.
The TCJA reduced the penalty to zero for tax year 2019 and beyond. A carryback computation must reflect the tax as originally calculated for the carryback year.
Account for Additional Medicare Tax and Net Investment Income Tax
Lines 26 and 27 (page 2) require a separate calculation of Additional Medicare Tax (0.9% on wages above threshold) and Net Investment Income Tax (3.8% on net investment income above threshold) for each carryback year. These taxes do not reduce with an NOL carryback and must be recalculated or held constant. You must apply the instructions’ guidance on treatment consistently across all carryback years.
Complete Computation of Decrease in Tax (Lines 10–32)
For each carryback year, compute taxable income and total tax before and after the carryback using the columns provided on pages 2–3. Lines 10–30 require step-by-step recalculation of AGI, deductions, exemptions, income tax, credits, and all other taxes.
Line 28 specifically calls for the health care individual responsibility payment to be included or excluded per the 2018 instructions. Line 32 must show the total tax decrease resulting from the carryback.
Attach Schedule D Reconciliation and Section 1202 Exclusion Support
Attach a supporting schedule reconciling Schedule D losses (lines 16 and 19 reference Schedule D Form 1040 line numbers for 2018) and documenting any section 1202 exclusion (line 17). For 2018, section 1202 exclusion eligibility applies to qualified small business stock gains. The computation must correctly identify which gains qualify and the correct exclusion percentage under current law.
Confirm Reportable Transaction Disclosure Status
Answer line 8 (page 1) regarding whether any part of the NOL or credit carryback results from a reportable transaction requiring Form 8886 disclosure. If yes, attach Form 8886 for the 2018 tax year. You must identify which reportable transaction gave rise to the loss or credit component being carried back to prior years.
Address Foreign Tax Credit Release (If Applicable)
Line 9 (page 1) asks whether the carryback caused the release of foreign tax credits or other credits due to foreign tax credit release. If the 2018 NOL or credit carryback interacts with foreign source income or prior-year foreign tax credit limitations, document the release and any resulting credit recapture. You must attach a separate detailed schedule showing the calculations and effects of the credit release.
Sign and File Separately
Both the taxpayer and spouse (if filing jointly for 2018) must sign and date the form. Mail Form 1045 in a separate envelope—not attached to the 2018 tax return—per instructions.
Include the required preparer information and PTIN if a paid preparer prepared the application. The IRS will process your application within 90 days from the later of the filing date or the return due date.
Year-Specific IRS Updates and Changes for 2018
- CARES Act NOL Provisions: The CARES Act, enacted in March 2020, retroactively allowed 2018 NOLs to be carried back five years, reversing the TCJA’s elimination of NOL carrybacks for tax years ending after December 31, 2017.
- Domestic Production Activities Deduction Repeal: The TCJA repealed the DPAD for tax years beginning after December 31, 2017, making it unavailable for calendar year 2018 taxpayers.
- Medical Expense Deduction Floor: The TCJA temporarily reduced the medical expense deduction threshold to 7.5% of AGI for 2018, providing broader access to this itemized deduction.
- Miscellaneous Itemized Deductions Suspended: The TCJA suspended all miscellaneous itemized deductions subject to the 2% AGI floor for tax years 2018 through 2025.
- Personal Casualty Loss Limitation: The TCJA limited personal casualty and theft loss deductions to only those arising from federally declared disasters, subject to standard floors.
- Individual Shared Responsibility Payment: The individual mandate penalty applied for 2018, with the TCJA reducing it to zero starting in tax year 2019.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
