Form 1045 Application for Tentative Refund (2017): A Complete Guide
What the Form Is For
Form 1045 is the IRS's ""fast-track"" refund application that lets individuals, estates, and trusts quickly get money back when they've suffered a financial loss or overpaid taxes in previous years. Think of it as an express lane for certain types of tax refunds that would otherwise take much longer through the regular amendment process.
The form primarily handles four situations: carrying back a Net Operating Loss (NOL)—which occurs when your allowable tax deductions exceed your income for the year; carrying back an unused general business credit you couldn't fully use; carrying back a net section 1256 contracts loss from certain investment contracts; or claiming an overpayment due to a ""claim of right"" adjustment under section 1341(b)(1), which happens when you had to repay income you reported in an earlier year.
The real advantage of Form 1045 is speed. The IRS commits to processing your application within 90 days, compared to the potentially longer wait for amended returns filed on Form 1040X. For taxpayers facing cash flow problems after a bad business year or major loss, this faster turnaround can make a significant difference. IRS.gov
When You'd Use It (Late/Amended Scenarios)
Form 1045 isn't something you file with your original tax return—it's a separate application filed after you've already filed your return for the year in which the loss or credit occurred. You must file Form 1045 within one year after the end of the tax year in which the NOL, unused credit, net section 1256 contracts loss, or claim of right adjustment arose. For the 2017 tax year, this meant filing by December 31, 2018.
Here's a critical point: you must file your 2017 income tax return before or on the same date you file Form 1045. The IRS won't process your application until your regular return is on file. Don't send them together in the same envelope, though—Form 1045 requires separate mailing to the appropriate IRS Service Center for your location.
If you miss the one-year window for Form 1045, you haven't lost your right to the refund—you'll simply need to use the slower route of filing Form 1040X (Amended U.S. Individual Income Tax Return) instead. Form 1040X generally must be filed within three years after the due date of the return for the applicable tax year. The trade-off is time: Form 1040X doesn't come with the 90-day processing guarantee, though you gain the right to file suit in court if the IRS doesn't process your claim within six months or if they disallow it and you disagree. IRS.gov
Key Rules for 2017
The 2017 tax year had specific rules that affected how losses could be carried back. For most NOLs in 2017, the general rule required you to carry the loss back two years before you could carry it forward. This meant a 2017 NOL would first be applied to your 2015 tax return, then to 2016 if anything remained, and only then could unused portions be carried forward up to 20 years into the future.
However, several special categories allowed longer carryback periods. Eligible losses—which included property losses from fire, storm, shipwreck, other casualties, or theft—could be carried back three years. Farming losses (losses attributable to farming businesses as defined in section 263A(e)(4)) received the most generous treatment with a five-year carryback period. Specified liability losses—arising from product liability or certain long-term environmental and legal liabilities—could be carried back an impressive ten years. Qualified disaster losses from federally declared disasters occurring before January 1, 2010, also qualified for a five-year carryback.
You had the option to waive the carryback period entirely and instead carry your NOL forward only. This election had to be made by attaching a statement to your 2017 tax return filed on or before the due date (including extensions). If you filed on time without making this election, you could still make it on an amended return filed within six months of the due date (excluding extensions). Once made, this election was irrevocable for the tax year—so you needed to consider carefully whether getting refunds for previous years' taxes or saving the loss for future income made more financial sense for your situation.
One important warning from the IRS: carrying back an NOL to an earlier year might trigger Alternative Minimum Tax (AMT) liability for that earlier year, even if you didn't owe AMT when you originally filed. This potential complication meant you needed to complete Form 6251 (Alternative Minimum Tax—Individuals) for each carryback year to ensure accurate calculations. IRS.gov
Step-by-Step (High Level)
Step 1: Calculate Your Net Operating Loss
Complete Schedule A of Form 1045 to determine your actual NOL amount. This requires starting with your taxable income from Form 1040, line 41 (or Form 1040NR, line 39), then making numerous adjustments. You'll add back certain deductions that aren't connected to your business, handle capital losses specially, and account for the domestic production activities deduction. The calculation can be complex because you must separate ""business"" deductions (like rental losses, self-employment expenses, and business property sales) from ""nonbusiness"" deductions (like most itemized deductions and the standard deduction).
Step 2: Identify Which Years to Carry the Loss Back
Determine whether your loss qualifies for any special extended carryback periods (three years for eligible losses, five years for farming losses, ten years for specified liability losses). If not, you'll use the general two-year carryback rule. Mark the appropriate years in the column headings on Form 1045.
Step 3: Refigure Each Carryback Year's Tax
This is where Form 1045 gets detailed. For each year you're carrying the loss back to, you complete a pair of columns showing ""Before carryback"" and ""After carryback"" amounts. You'll need to pull out your old returns and recalculate your adjusted gross income, deductions, exemptions, taxable income, and tax liability as if the NOL deduction had been available in those earlier years. Many items are interconnected—changing your adjusted gross income might affect your IRA deduction, medical expense deduction, and various credits, all of which need to be refigured.
Step 4: Complete Schedule B (If Necessary)
If your NOL is larger than the modified taxable income for the earliest carryback year, you must complete Schedule B to figure the NOL carryover to the next year. This schedule ensures you properly track how much of the loss is absorbed in each year and how much remains to carry forward.
Step 5: Gather Supporting Documentation
Attach copies of pages 1 and 2 of your 2017 Form 1040 and relevant schedules (A, D, J if applicable). Include all Schedules K-1 from partnerships or S corporations, Form 6251 for AMT calculations, any extension applications, and any other forms that generated the carryback (like Form 3800 for business credits or Form 6781 for section 1256 contracts).
Step 6: Sign, Date, and Mail
Both spouses must sign if filing jointly. Mail Form 1045 to the IRS Service Center for your location (as shown in your 2017 tax return instructions) in a separate envelope from your 2017 tax return. IRS.gov
Common Mistakes and How to Avoid Them
Mistake #1: Filing Before Your Current-Year Return
Many taxpayers get eager and file Form 1045 before filing their 2017 return. The IRS won't process your application until your 2017 return is on file, causing delays. Always file your 2017 return first or simultaneously.
Mistake #2: Incomplete Documentation
The instructions explicitly warn that applications with material omissions or math errors that aren't corrected within 90 days may be disallowed. Missing a required attachment—like Form 6251, Schedule K-1s, or the detailed computation of your NOL—can torpedo your entire application. Create a checklist and attach copies of all required forms.
Mistake #3: Incorrect NOL Calculation
The Schedule A calculation requires distinguishing business from nonbusiness items, which trips up many filers. For example, nonbusiness deductions include most itemized deductions (except casualty losses and employee business expenses) and the standard deduction, but not the deduction for personal exemptions. State income tax on business income is a business deduction; state income tax on investment income is not. Review IRS Publication 536 for detailed examples if you're uncertain.
Mistake #4: Forgetting to Refigure Interconnected Items
When your adjusted gross income changes due to the NOL carryback, numerous other items change too: taxable Social Security benefits, IRA deductions, medical expense deductions (subject to the AGI floor), miscellaneous itemized deductions (subject to the 2% AGI floor), personal exemption phaseouts, and various credits. Each must be recalculated. Missing these cascading effects understates your refund.
Mistake #5: Not Considering AMT
The IRS specifically cautions that NOL carrybacks may create AMT liability in earlier years. Failing to complete Form 6251 for each carryback year and account for AMT can result in an incorrect refund calculation that the IRS will later correct—potentially with penalties and interest if you received an excessive refund.
Mistake #6: Missing the One-Year Deadline
Form 1045 must be filed within one year after the end of the loss year. For 2017, that meant by December 31, 2018. Missing this deadline means you'll need to use Form 1040X instead, losing the 90-day processing guarantee. Mark your calendar when you realize you have an NOL. IRS.gov
What Happens After You File
Once the IRS receives your complete Form 1045, they commit to processing it 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 the due date (including extensions) for filing your 2017 income tax return.
The IRS may contact you or your authorized representative (like your accountant or tax preparer) if they need additional information to process your application. If you want to designate someone to handle these contacts, attach Form 2848 (Power of Attorney and Declaration of Representative) to your Form 1045.
Here's a crucial point many taxpayers miss: receiving your refund check doesn't mean the IRS has accepted your application as correct or final. The instructions state clearly that ""the processing of Form 1045 and the payment of the requested refund doesn't mean the IRS has accepted your application as correct."" The IRS retains the right to later determine that your claimed deductions or credits were overstated, particularly due to overstatement of property values, negligence, disregard of rules, or substantial understatement of income tax. If they make such a determination, you may owe penalties, plus additional tax and interest (compounded daily).
Form 1045 is technically an ""application for tentative refund,"" not a formal claim for credit or refund. This distinction has legal implications: if the IRS disallows your Form 1045 application in whole or in part, you cannot file suit challenging the disallowance in court. However, you can still file a regular claim for credit or refund using Form 1040X before the statute of limitations expires, and Form 1040X does give you the right to sue if the IRS disallows your claim or doesn't process it within six months.
If your Form 1045 is disallowed due to material omissions or uncorrected math errors, you haven't lost your rights—you'll simply need to pursue the refund through the regular Form 1040X process. This underscores the importance of filing a complete, accurate application the first time. IRS.gov
FAQs
Q1: Can I file Form 1045 electronically for 2017?
No. For the 2017 tax year, Form 1045 could only be filed by paper mail. The IRS didn't begin accepting electronic filing of Form 1045 until the 2024 tax year. You must mail your 2017 Form 1045 to the appropriate IRS Service Center.
Q2: What's the real advantage of Form 1045 over Form 1040X?
Speed and simplicity. Form 1045 processes multiple carryback years on one form with a 90-day processing guarantee, while Form 1040X requires a separate amended return for each year and has no guaranteed processing timeline (though you gain litigation rights if they take more than six months). If you're within the one-year window and need money quickly, Form 1045 is usually the better choice.
Q3: If I have both a farming loss and a regular business loss in 2017, how do I carry them back?
You carry back different portions to different years. The farming loss portion gets carried back five years (to 2012 first), while the regular business loss portion gets carried back two years (to 2015 first). You may need multiple Forms 1045 to cover all the affected years. Complete Schedule A on only one form, but use additional forms for additional carryback years beyond what fits on the first form.
Q4: Can I use Form 1045 if the IRS is already auditing one of my carryback years?
Yes, but with limitations. The instructions explain that items you and the IRS are disputing will only be taken into account in computing your tentative carryback adjustment if they were reflected on your original return or in assessments/refunds made before you file Form 1045. Disputed items in limbo won't affect the calculation.
Q5: What happens if my NOL carryback causes me to lose general business credits in an earlier year?
You may be able to carry back those released credits one year. However, you cannot use Form 1045 to carry released general business credits or released foreign tax credits to earlier years—you must file Form 1040X for those years instead. See section 39 and the Instructions for Form 3800 for details on general business credit carrybacks.
Q6: I filed a joint return in 2017 but filed separately in 2015. Does this affect my NOL carryback?
Yes. Special rules apply when you changed filing status between the loss year and the carryback years. The instructions refer to IRS Publication 536 for detailed guidance on these situations. You'll need to attach a detailed computation showing how you allocated the carryback between spouses or figured the carryback considering the different filing statuses.
Q7: If I receive my refund and then the IRS later says I calculated it wrong, what happens?
Any excessive refund can be billed as if it were due to a math or clerical error on your return. You may owe penalties, plus the additional tax will generate interest compounded daily from the date you received the excessive refund. This is why accuracy is crucial—a mistake in your favor isn't really in your favor long-term. IRS.gov
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