What IRS Form 1045 (2022) Is For
IRS Form 1045 (2022) allows individuals, estates, and trusts to request a tentative refund by carrying back losses or unused credits to prior tax years. When taxpayers experience a net loss (NOL) or have unused credits from the current year, they can apply those to reduce tax liability from profitable years.
This process allows for a tax refund within 90 days, providing a quicker alternative to the traditional amended return process, which can take months. The form helps expedite tax relief by allowing taxpayers to adjust their prior year's income tax payments based on the current year's NOL carryforward or carryback deductions.
When You’d Use IRS Form 1045 (2022)
IRS Form 1045 (2022) is used when taxpayers experience a net operating loss (NOL) and wish to apply that loss to previous tax years. If a taxpayer incurs a net operating loss, they can carry it back to earlier years to reduce taxable income and potentially receive a refund. For most taxpayers, this loss can be carried forward indefinitely to offset future income, but applying it to prior years through Form 1045 can result in a quick tax refund.
You can also use the form to carry back losses from a net section 1256 contract (which refers to specific contracts under section 1256 of the Internal Revenue Code) or unused credits. A tax preparer can help determine whether NOL carrybacks are beneficial and ensure the correct net operating losses are applied to the appropriate years.
Key Rules or Details for 2022
In 2022, significant changes affected how net operating losses (NOLs) are handled. The Tax Cuts and Jobs Act restricted most NOLs arising in 2022 to be carried forward only, with no option for carrybacks except for certain farming losses. If you are a married filing taxpayer or part of an estate or trust, this could impact the way your gross income is adjusted for personal finance purposes.
The Form 1045 application for tentative refunds can still be used for NOL carrybacks to prior years, though limitations apply for tax years ending in 2022. Any carry-forward of losses beyond this year will be subject to the standard rules, with a focus on ensuring the right adjustment is made. Electronic filing for future years is possible, but 2022 filings must follow the IRS’s official process.
Step-by-Step (High Level)
Filing Form 1045 involves several critical steps that must be followed to ensure accuracy. Here is the process:
- Make sure that the original return has been filed with the IRS before submitting Form 1045.
- Review gross income and deductions to determine the NOL amount in accordance with the Internal Revenue Code.
- Select the appropriate tax years to which the NOL carryback will apply.
- Gather the original return along with all relevant forms and schedules needed for the application.
- Mail the completed Form 1045 application for tentative refund to the IRS Service Center, ensuring all necessary attachments are included.
By following these steps, taxpayers can ensure their application is complete and submitted properly.
Common Mistakes and How to Avoid Them
Identifying and correcting common mistakes when filing Form 1045 is essential to ensure accurate and timely processing. The following table lists frequent errors and provides practical solutions for avoiding them:
Common Mistakes and How to Avoid Them
1. Missing Attachments
- How to Avoid It: Ensure that all required forms and schedules—including the original tax return—are attached before submitting.
2. Incorrect NOL Calculation
- How to Avoid It: Verify the Net Operating Loss amount and confirm that all necessary adjustments to gross income have been applied.
3. Filing Before the Original Return
- How to Avoid It: Submit Form 1045 only after the income tax return for the year is fully completed.
4. Late Submission
- How to Avoid It: Track the due date carefully to avoid missing the filing deadline.
5. Using the Wrong Form
- How to Avoid It: Confirm that Form 1045 is the correct form for NOL carrybacks before filing.
Avoiding these mistakes helps ensure proper compliance, more efficient processing, and faster refunds.
What Happens After You File
After submitting Form 1045, the IRS begins processing the application, which typically takes up to 90 days. During this period, the IRS reviews the NOL carryovers and any other adjustments made on the form. If any discrepancies are found, the IRS may contact you for clarification or additional documentation.
Once the review is complete, taxpayers will receive a tentative refund based on the calculations provided. It’s important to note that the IRS may still perform an audit, especially if your refund exceeds a positive number or if your application is flagged for review. If approved, the refund will be issued, and the IRS may apply any applicable taxes from the qualified small business stock or other considerations.
Timely filing and accurate information will ensure a smoother, faster process for your refund. Taxpayers who want to confirm filing deadlines, carryback rules, and common Form 1045 errors can consult the IRS Form Help Center.
FAQs
What is the purpose of filing Form 1045?
Form 1045 is used to apply for a tentative refund by carrying back net operating losses (NOLs) to earlier tax years. Taxpayers can use this form to reduce their total tax liability from those years, resulting in a faster refund. The 1045 application for tentative refund allows taxpayers to apply NOL deductions from the current year to previous tax returns, expediting their refund process.
Can I electronically file Form 1045?
Currently, the IRS does not allow Form 1045 applications to be electronically filed for tax years like 2022. For these years, you must submit a paper application through the IRS website or mail it to the appropriate IRS Service Center. Future years may allow for electronic submission, but for now, paper filing is required.
What happens if the one-year deadline for filing Form 1045 is missed?
If you miss the one-year deadline, you will need to file Form 1040-X (Amended Return) to claim a refund, but this method will take longer to process than Form 1045. While Form 1045 offers quicker processing for carryback period claims, Form 1040-X allows you to claim an overpayment from a previous year. This is particularly important if the exception applies or if you’re dealing with NOL carryovers to later years.
Can I use Form 1045 if I have a carryforward from the previous year?
Yes, NOL carryforward can be applied to later years for future tax reductions. However, the Form 1045 application is specifically for NOL carrybacks, meaning you can only use it for carrying back losses to prior tax years. If you're looking to carry forward indefinitely, the carryback period would not apply, and you would need to explore alternative filing options.
How does the CARES Act affect Form 1045 filings?
The CARES Act temporarily allowed for a more flexible carryback period for certain NOLs, enabling losses from tax years 2018-2020 to be carried back five years. Taxpayers who meet the criteria can file Form 1045 to carry back those losses to previous years, reducing their minimum tax liability from those periods. If the NOL occurs in 2020, this provision might allow for a more substantial refund.
Taxpayers who need access to related federal forms, including supporting schedules, can use Federal Fillable Tax Forms to locate the correct filings.
