Form 1045 (2020): Tentative Refund Application Guide Checklist

2020 Form 1045 Purpose

Form 1045 allows individuals, estates, and trusts to claim a tentative refund by carrying back a 2020 net operating loss, unused general business credit, or net section 1256 contracts loss to one or more of the five preceding tax years. The 2020 instructions introduced expanded NOL carryback provisions under the CARES Act, permitting unrestricted carryback of 2020 NOLs to all five preceding years rather than limiting carryback as prior rules had done.

Eligibility and Carryback Periods

You must verify your filing eligibility by confirming you are an individual, estate, or trust with a 2020 net operating loss, unused general business credit, or net section 1256 contracts loss. The 2020 instructions clarified that CARES Act provisions allow carryback of 2020 NOLs without the taxable income limitation that applied to losses in certain prior years.

For NOL carrybacks, you can carry back up to five preceding tax years: 2015, 2016, 2017, 2018, and 2019, as permitted under the CARES Act provisions for 2020 losses. Net section 1256 contracts losses may be carried back three years only to 2019, 2018, and 2017.

Filing Steps for 2020 Form 1045

1. Identify the preceding tax years to which you will carry back losses or credits and enter the ending date for each year in the designated spaces on page 1.
2. Complete Schedule A if carrying back an NOL to calculate the net operating loss available for carryback or carryforward.
3. Calculate the domestic production activities deduction on line 28 of Schedule B using rules applicable to the carryback year only if your carryback year is 2017 or earlier, as this deduction was repealed by the Tax Cuts and Jobs Act for tax years beginning after December 31, 2017.
4. Complete the adjustment-to-itemized-deductions section on Schedule B, lines 11 through 38, only if your carryback year is 2017 or earlier and you itemized deductions in that year.
5. Skip the miscellaneous itemized deductions lines on Schedule B, lines 33 through 37, for 2018 and 2019 carryback years because the Tax Cuts and Jobs Act suspended these deductions for years 2018 through 2025.
6. Recalculate the excess advance premium tax credit repayment for each affected carryback year on page 1, line 17, and enter the recalculated repayment in the after carryback column, as ACA reconciliation remained mandatory for 2020 filers.
7. Recalculate Additional Medicare Tax on page 1, line 26, for each carryback year using that year's threshold amounts and wage or self-employment income definitions rather than 2020 threshold values.
8. Address health care individual responsibility payment reconciliation on page 1, line 28, only for carryback years 2014 through 2018, as the federal individual mandate penalty was reduced to zero for tax year 2019 and all subsequent years.
9. Sign and date the form, ensuring both spouses sign if filing jointly, and mail Form 1045 in a separate envelope without attaching it to any tax return.

Domestic Production Activities Deduction Rules

Calculate the domestic production activities deduction on line 28 of Schedule B using rules applicable to the carryback year only if your carryback year is 2017 or earlier, as this deduction was repealed by the Tax Cuts and Jobs Act for tax years beginning after December 31, 2017. You must apply the tax rates and calculation methods from the specific carryback year rather than using the 2020 rules when determining this deduction.

For carryback years 2018 and 2019, skip line 28 entirely because the domestic production activities deduction does not exist for those years. This line remains relevant only for carryback years 2015, 2016, and 2017.

Year-Specific 2020 Form 1045 Provisions

The CARES Act NOL carryback provision permitted carryback of 2020 NOLs to all five preceding tax years without limitation, overriding prior-year rules that restricted carryback in some cases. This change appears only in the 2020 instructions and applies exclusively to 2020 losses arising in tax years beginning in 2018, 2019, and 2020.

Taxpayers may elect to exclude section 965 inclusion years from the five-year carryback period, and carrying back an NOL to a section 965 year in the five-year carryback period creates a deemed election under section 965(n). You must file Form 1045 within one year after the end of the year in which the NOL arose to claim this tentative refund.

Premium Tax Credit and Reconciliation Requirements

The 2020 instructions retained premium tax credit reconciliation requirements and required a separate calculation of excess advance premium tax credit repayment in the after carryback columns on line 17. You must complete Form 8962 using your refigured household income for carryback years 2015, 2016, 2017, 2018, or 2019 to determine whether advance payments exceeded your allowable premium tax credit.

The reconciliation process remained mandatory for 2020 filers who received advance payments of the premium tax credit through the health insurance marketplace. Enter the recalculated repayment amount from Form 8962, line 29, in the after carryback column for each applicable year.

Deduction Adjustments for Carryback Years

You must refigure certain income and deductions based on adjusted gross income when applying an NOL carryback to prior years. Amounts requiring recalculation include the special allowance for passive activity losses from rental real estate activities, taxable social security benefits, IRA deductions, student loan interest deductions, and excludable savings bond interest.

The qualified business income deduction under section 199A also requires refiguring if you took this deduction on your 2018 or 2019 return, as your QBI deduction may change due to reduced taxable income from the NOL carryback. Attach a detailed computation showing how you calculated these adjustments for each carryback year affected by the NOL.

Reportable Transaction Disclosure Requirements

The 2020 form added an explicit reference to Form 8886 for losses or credits from reportable transactions. Filing Form 1045 does not satisfy Form 8886 filing requirements. You must attach all Forms 8886 filed with your 2020 income tax return when submitting Form 1045.

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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.