What Form 1045 Is For

Form 1045 is the IRS document that individuals, estates, and trusts use to request a quick tax refund when certain losses or credits from the current year can be "carried back" to offset income from previous years. Think of it as a fast-track way to get money back when you've had a bad financial year that wipes out taxable income from better years in your past.

The form specifically applies when you're carrying back:

• A Net Operating Loss (NOL) – when your business deductions exceed your income for the year
• An unused general business credit – tax credits your business couldn't use because you didn't owe enough tax
• A net section 1256 contracts loss – losses from certain futures and options contracts
• An overpayment due to a claim of right adjustment – when you had to pay back income you reported in an earlier year

The magic of Form 1045 is speed: the IRS must process it within 90 days, whereas standard amended returns can take much longer. For taxpayers facing cash flow problems after a loss year, this accelerated timeline can be a financial lifeline. IRS Form 1045 Instructions

When You’d Use Form 1045 (Late/Amended Filing)

You must file Form 1045 within one year after the end of the tax year in which your NOL, unused credit, net section 1256 contracts loss, or claim of right adjustment occurred. For the 2014 tax year, this meant filing by December 31, 2015 for calendar-year taxpayers.

Critical timing rule: You must file your 2014 income tax return (Form 1040, 1040NR, or 1041) on or before the date you file Form 1045. You cannot jump the gun and file for the refund before completing your regular tax return. The two documents must be mailed in separate envelopes – do not attach Form 1045 to your tax return.

Alternative option: Instead of using Form 1045, individuals can file an amended return (Form 1040X), and estates/trusts can file an amended Form 1041. The key differences:

• Form 1045 gets processed within 90 days; Form 1040X has no processing deadline (though you can sue if it's not processed within 6 months)
• Form 1040X must be filed within 3 years of your original return's due date
• If Form 1045 is disallowed, you cannot sue; with Form 1040X, you have legal recourse

If you miss the one-year Form 1045 deadline, you can still file Form 1040X within the 3-year window to claim your carryback refund. IRS Form 1045 Instructions

Key Rules or Details for 2014

Carryback Periods (How Far Back You Can Go):
The 2014 tax law established different carryback periods depending on your type of loss:

• General NOLs: 2 years back (to 2012 and 2013)
• Farming losses: 5 years back (to 2009-2013) – applies to losses from farming businesses as defined in tax code
• Eligible losses: 3 years back (to 2011-2013) – includes casualty losses from fires, storms, theft, or federally declared disasters for small businesses
• Qualified disaster losses: 5 years back (to 2009-2013) – losses from federally declared disasters before January 1, 2010
• Specified liability losses: 10 years back (to 2004-2013) – losses from product liability or environmental cleanup obligations that existed at least 3 years before the loss year

Waiving the carryback: You can elect to skip the carryback entirely and only carry your NOL forward (up to 20 years). To make this election for 2014, you must attach a statement to your 2014 tax return by the due date (including extensions) stating you're electing under section 172(b)(3) to relinquish the carryback period. If you filed on time without making the election, you have 6 months after the due date to file an amended return with the election. Once made, this election is irrevocable.

90-day processing guarantee: The IRS must process Form 1045 within 90 days from the later of: (1) the date you file the complete application, or (2) the last day of the month that includes your 2014 tax return's due date.

Important limitation: Form 1045 is not treated as a formal claim for refund. If it's disallowed due to material omissions or math errors not corrected within 90 days, you cannot challenge the disallowance in court. However, the IRS may later audit and challenge the refund even after paying it. IRS Form 1045 Instructions

Step-by-Step (High Level)

Step 1: File your 2014 tax return

Complete and file your 2014 Form 1040, 1040NR, or Form 1041 (for estates/trusts) first. Do not attach Form 1045 to this return.

Step 2: Calculate your NOL

Complete Schedule A of Form 1045 to compute your net operating loss. This involves taking your taxable income and making adjustments for nonbusiness income and deductions. The formula adds back nonbusiness deductions (like the standard deduction, most itemized deductions, and personal exemptions) while subtracting nonbusiness income (like investment dividends and interest).

Step 3: Determine carryback years

Based on the type of loss you have, identify which prior years you'll carry the loss back to. Start with the earliest eligible year and work forward.

Step 4: Complete the computation section (Lines 10-27)

For each carryback year, you'll fill out paired columns showing your tax situation "Before carryback" and "After carryback." This requires:

• Refiguring your adjusted gross income after applying the NOL deduction
• Recalculating deductions that are percentage-based (medical expenses, charitable contributions, miscellaneous deductions)
• Recomputing your tax liability
• Determining any credits that may have been affected

Step 5: Complete Schedule B (if needed)

If your NOL is larger than the income in your earliest carryback year, Schedule B calculates how much loss remains to carry to the next year. This schedule figures your "modified taxable income" for each carryback year.

Step 6: Gather required attachments

Attach copies of: your 2014 tax return pages, relevant schedules (A, D, J if applicable), all Schedule K-1s from partnerships/S-corps, Form 6251 for Alternative Minimum Tax calculations, and any forms showing the source of credits or losses (Form 3800, Form 6781, etc.).

Step 7: Sign and mail

Sign and date the form (both spouses must sign joint returns). Mail it in a separate envelope from your tax return to the IRS Service Center for your location. IRS Form 1045

Common Mistakes and How to Avoid Them

Mistake #1: Filing Form 1045 before your tax return

Many taxpayers rush to get their refund and file Form 1045 before completing their regular return. This delays processing. Always file your 2014 Form 1040 first, then submit Form 1045 separately.

Mistake #2: Incomplete documentation

The instructions explicitly warn that applications with missing forms may be delayed or disallowed. Create a checklist: Did you include pages 1-2 of Form 1040? Schedule A showing itemized deductions? Form 6251 for each year if there's alternative minimum tax? All Schedule K-1s? Missing even one document can derail your 90-day processing timeline.

Mistake #3: Not refiguring percentage-based deductions

When your adjusted gross income changes due to an NOL carryback, several deductions must be recalculated: medical expenses (based on percentage of AGI), miscellaneous itemized deductions (2% floor), and potentially charitable contributions. Failing to refigure these items results in math errors that can get your application disallowed.

Mistake #4: Carrying back the wrong amount or to the wrong years

Not all NOLs follow the standard 2-year carryback rule. Carefully determine whether your loss qualifies as a farming loss (5-year carryback), eligible loss (3-year carryback), or specified liability loss (10-year carryback). Applying the loss to ineligible years wastes the loss and delays your refund.

Mistake #5: Forgetting about Alternative Minimum Tax (AMT)

The instructions contain a prominent warning: carrying back an NOL may create AMT liability in the carryback year, even if you didn't owe AMT when you originally filed. Always complete Form 6251 for each carryback year to check whether AMT applies after the carryback.

Mistake #6: Assuming approval means acceptance

Just because the IRS processes your Form 1045 and sends a refund doesn't mean they've accepted it as correct. The form can be audited later, and if the IRS finds overstatements, negligence, or substantial understatements, you'll owe back taxes plus penalties and daily compounded interest. IRS Form 1045 Instructions

What Happens After You File

Within 90 days: The IRS must process your application by the 90-day deadline, measured from the later of your filing date or the last day of the month containing your 2014 return's due date. If they need more information, they'll contact you or your authorized representative during this period.

Tentative refund issued: If approved, the IRS will issue your refund check or direct deposit. This money is paid as a "tentative" refund – meaning it's not final.

Your obligations continue: Even after receiving the refund, you must:

• Keep all records and documentation for at least 3 years (longer for certain situations)
• Report the refund on your 2014 tax return if it affects your tax calculation
• Be prepared for potential audit

If there are errors: If the application contains material omissions or math errors that you don't correct within 90 days, it may be disallowed. You cannot sue over this disallowance, but you can still file Form 1040X before the statute of limitations expires (typically 3 years).

Excessive refunds: If the IRS later determines the refund was too large – whether due to audit, mathematical error, or overvaluation of property – they'll bill you for the excess amount as if it were a math or clerical error. Interest will be charged, compounding daily from the date of the refund.

Long-term audit risk: The IRS can examine your carryback claim for years after payment. If penalties apply (negligence, substantial understatement, overvaluation of property), these will be assessed along with accumulated interest. IRS Form 1045 Instructions

FAQs

Q1: Can I e-file Form 1045 for 2014?

No. In 2014, Form 1045 could only be filed by mail. (Note: Electronic filing became available for later tax years, but not for 2014.) You must mail a paper form to the IRS Service Center that handles returns for your geographic location.

Q2: What if I have NOLs from multiple years?

You must apply NOLs to carryback years in the order they occurred – oldest first. If you're carrying back NOLs to years before the 3 years preceding 2014, you may need to use additional Forms 1045. Complete lines 1-9 and Schedule A on only one form (for the earliest years), and sign only that form.

Q3: Can I carry back a loss if I filed jointly in some years and separately in others?

Yes, but special allocation rules apply. You'll need to figure out how the carryback is allocated between spouses for the years with different filing statuses. The instructions reference Publication 536 for detailed allocation schedules. Attach a detailed computation showing your allocation method.

Q4: What if my carryback releases foreign tax credits?

Form 1045 cannot be used to carry released foreign tax credits back to earlier years. If your NOL carryback eliminates or reduces a prior year's foreign tax credit, you must file Form 1040X for any earlier years where you want to claim those released credits. The same limitation applies to general business credits that are released due to foreign tax credit changes.

Q5: Should I use Form 1045 or Form 1040X?

Form 1045 is faster (90-day processing) but offers no legal recourse if denied. Form 1040X takes longer but allows you to sue if your claim is denied, and you can challenge a denial for up to 2 years. Choose Form 1045 if you need cash quickly and are confident in your calculations. Choose Form 1040X if your situation is complex or disputed, or if you've missed the 1-year Form 1045 deadline.

Q6: Can I change my mind after electing to waive the carryback?

No. If you elect to waive the carryback period and carry your NOL forward only, that election is irrevocable. Make this decision carefully, considering whether you expect higher tax rates in future years and whether you need immediate cash flow.

Q7: What happens if I carry back more loss than the carryback year can absorb?

Any unused NOL after applying it to all available carryback years can be carried forward up to 20 years (from 2014). Schedule B calculates this carryover amount. You'll apply the unused portion to future tax years until it's fully absorbed or the 20-year period expires.

Sources

All information in this guide comes from official IRS publications available at IRS.gov:

• 2014 Instructions for Form 1045
• 2014 Form 1045
• About Form 1045, Application for Tentative Refund