What IRS Form 1045 (2023) Is For
IRS Form 1045 (2023) is an Internal Revenue Service document that enables taxpayers, estates, and trusts to request a quick tax refund after experiencing a net operating loss. The form helps offset taxable income from prior tax years, reduce overall tax liability, and improve cash flow for small businesses and noncorporate taxpayers. It also applies to unused general business credits, casualty losses, or qualified small business stock deductions.
Taxpayers use Form 1045 to recover taxes paid during profitable years after reporting a loss in the current year. Filing this form results in faster processing than submitting an amended income tax return. It ensures eligible taxpayers can apply net operating losses efficiently and receive refunds that support their financial stability.
When You’d Use IRS Form 1045 (2023)
Taxpayers file Form 1045 after completing their income tax return for the year when a net operating loss occurs. The form allows the loss to offset income from prior tax years, resulting in a faster refund through a Net Operating Loss carryback. Individuals, estates, and trusts may also use it to claim unused credits, right adjustments, or other carryback claims affecting multiple taxable years.
The Internal Revenue Service requires Form 1045 to be filed within one year after the due date of the loss-year return. It must be filed separately from any amended return since each serves a distinct purpose and follows different review procedures. Proper completion ensures accurate refund processing and full compliance with IRS requirements.
Taxpayers who need supporting documents for Form 1045 can browse Federal Fillable Tax Forms.
Key Rules or Details for 2023
The Internal Revenue Service updated rules affecting how taxpayers handle Net Operating Loss carrybacks and carryforwards for the 2023 tax year. Most taxpayers cannot carry back losses to a previous tax year, except for certain farming businesses and specific insurance companies. The Tax Cuts and Jobs Act and related provisions in the Internal Revenue Code generally eliminated broad carryback options for recent taxable years.
A net operating loss incurred in 2023 can be carried forward to offset income in future years, subject to an 80 percent limitation on taxable income. Any unused portion becomes part of the taxpayer’s Net Operating Loss carryover period until it is fully absorbed. Taxpayers must calculate figures carefully and apply accurate adjustments across the same period for consistency and compliance with IRS requirements.
Step-by-Step (High Level)
Filing Form 1045 requires precise organization to ensure that each figure, schedule, and attachment supports the refund request. The process involves several coordinated actions that help taxpayers document a net operating loss and related items correctly. Following these steps keeps the application consistent with Internal Revenue Service standards and expedites refund processing.
Step 1: Each taxpayer reviews eligibility to confirm that the Net Operating Loss qualifies for a carryback or carryforward.
Step 2: The taxpayer submits the income tax return for the prior year before preparing Form 1045 to prevent rejection.
Step 3: The applicant calculates the loss on Schedule A and lists deferred tax assets created by the adjustment.
Step 4: The individual attaches Form 6251 for alternative minimum tax and Schedule B for any multi-year carrybacks.
Step 5: The taxpayer signs and delivers the completed form to the proper IRS Service Center.
Common Mistakes and How to Avoid Them
Taxpayers often make preventable errors that delay refunds or reduce accuracy in their Form 1045 submissions. Each mistake listed below occurs frequently during preparation and can be avoided through careful review and verification. The table outlines actual filing mistakes and provides direct methods to prevent them effectively.
Common Mistakes and How to Avoid Them
1. Taxpayers Omit Form 6251 or Schedule B
- How to Avoid It: Attach all required forms—including Form 6251 and Schedule B—whenever a net operating loss occurs.
2. Filers Miscalculate the NOL Deduction
- How to Avoid It: Recheck all net loss figures and ensure that nonbusiness deductions, capital gains, and other adjustments are applied correctly.
3. Individuals File Before the Loss-Year Return
- How to Avoid It: File the income tax return for the loss year before submitting Form 1045 to the IRS.
4. Preparers Ignore Excess Business Loss Limitations
- How to Avoid It: Review and apply Internal Revenue Code rules to confirm that any excess business loss meets the statutory thresholds.
5. Applicants Omit or Miscalculate AMT-Related Computations
- How to Avoid It: Complete Form 6251 to determine how the alternative minimum tax (AMT) affects the quick refund request.
Verifying each detail before mailing the form prevents costly delays, protects refund accuracy, and ensures complete compliance. Taxpayers who need help identifying supporting schedules and required attachments for Form 1045 can review the IRS Form Help Center.
What Happens After You File
After the taxpayer submits Form 1045, the Internal Revenue Service begins reviewing the application for completeness and accuracy. The review starts once the IRS confirms that the income tax return for the lost year has been filed. The agency generally completes its review within 90 days of receiving the form or by the due date of the return.
During this process, the IRS verifies the reported net operating loss and recalculates taxable income and modified adjusted gross income. The examiner checks whether itemized deductions, qualified business income, and nonbusiness income are consistent with the supporting forms. If the application is complete, the IRS approves the refund or requests clarification when additional documentation is required.
Accurate preparation ensures faster processing and consistent results for refund applications. Proper documentation ensures transparency, reduces correspondence delays, and supports compliance for future tax years. Timely responses maintain refund eligibility.
FAQs
What is a Net Operating Loss (NOL)?
A net operating loss occurs when allowable business deductions exceed taxable income during the same tax year. The IRS allows this loss to offset future taxable income or be applied to prior years through an approved carryback period. Taxpayers may carry the remaining NOL amount forward to reduce future taxable income under current carryforward rules.
How does the CARES Act affect the NOL carryback period?
The CARES Act temporarily expanded the NOL carryback period for earlier tax years beginning before 2021. This allowed taxpayers to apply net operating losses to prior years and claim refunds. For 2023, most NOLs can only be carried forward, except for certain farming losses and insurance companies.
Can estates and trusts file a 1045 application for a tentative refund?
Yes, estates and trusts can use Form 1045 to report an NOL and request a tentative adjustment. This process provides faster refunds compared to amended returns when a net operating loss occurs.
How long can an NOL be carried forward?
An NOL can be carried forward indefinitely to offset future taxable income until the balance becomes positive. Taxpayers must track each NOL year carefully and apply it in sequence to prevent overlapping deductions. Accurate documentation ensures compliance with carryforward rules.
Should taxpayers consult tax professionals before filing Form 1045?
Yes, tax professionals can confirm whether the NOL carryback or carryforward applies to multiple years and help avoid calculation errors. Their guidance ensures the tentative adjustment aligns with IRS requirements and supports accurate refund claims.
