What Form 1045 Is For

Form 1045, Application for Tentative Refund, is an IRS form that individuals, estates, and trusts can use to apply for a "quick refund" of taxes already paid. Think of it as an express lane for getting money back from the IRS when certain financial losses or credits from the current year can be applied to previous tax years.

The form is specifically designed for four situations. First, when you have a Net Operating Loss (NOL)—essentially when your allowable tax deductions exceed your income for the year, creating a loss that can be "carried back" to offset income from previous profitable years. Second, when you have an unused general business credit that wasn't fully used in the current year. Third, when you have a net section 1256 contracts loss from certain investment contracts. Finally, when you have an overpayment due to a claim of right adjustment under section 1341(b)(1), which occurs in specific situations where you had to repay income that was taxed in a prior year.

The beauty of Form 1045 is speed. Unlike the standard amended return process, the IRS is legally required to process Form 1045 applications within 90 days, making it the preferred choice when you need your refund quickly to improve cash flow or address financial hardship.

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

Timing is critical with Form 1045. You must file it within one year after the end of the tax year in which the NOL, unused credit, or other qualifying event occurred. For 2013, this means you had until December 31, 2014, to file Form 1045 for any losses or credits arising in the 2013 tax year.

Here's an important sequence to remember: You must file your regular 2013 income tax return before or at the same time as Form 1045, but they should be mailed in separate envelopes. You cannot file Form 1045 before filing your underlying tax return for the loss year.

If you miss the one-year deadline or prefer a different approach, you can still claim your refund by filing Form 1040X (Amended U.S. Individual Income Tax Return) instead. The trade-off is that Form 1040X takes longer to process—the IRS isn't required to act within 90 days, and processing typically takes six months or more. However, Form 1040X gives you up to three years from the due date of the original return to file, providing more flexibility if you discovered the loss opportunity later.

One strategic consideration: Form 1045 applications can be disallowed for material omissions or math errors, and unlike Form 1040X, you cannot challenge a disallowance in court. But you can still file Form 1040X as a backup if Form 1045 is disallowed, as long as you're within the three-year statute of limitations.

Key Rules for 2013

The 2013 tax year operates under specific carryback rules that determine how far back you can apply your losses. Understanding these rules is essential because different types of losses have different carryback periods.

General NOL carryback: Most net operating losses follow the standard two-year carryback rule. You carry the loss back to the second year before the loss year first, then to the first preceding year. Any unused loss can then be carried forward for up to 20 years.

Eligible loss carryback (three years): If part of your NOL stems from casualty losses (fire, storm, theft) affecting personal property, that portion gets a three-year carryback period. For small businesses affected by federally declared disasters, eligible losses from those disasters also receive the three-year treatment.

Farming loss carryback (five years): Losses specifically attributable to farming businesses can be carried back five years, starting with the fifth year before the loss and moving forward consecutively.

Qualified disaster loss carryback (five years): For losses from federally declared disasters occurring before January 1, 2010, the five-year carryback period applies, though certain types of property (golf courses, massage parlors, liquor stores) are excluded.

Specified liability loss carryback (ten years): These rare losses arising from product liability or environmental remediation liabilities can be carried back a full ten years.

Election to waive carryback: You can elect to waive the carryback period entirely and only carry losses forward. This election must be made by attaching a statement to your timely filed 2013 return (or within six months on an amended return). Once made, this election is irrevocable, so consider carefully whether you'll benefit more from immediate refunds or future deductions.

Personal exemption and standard deduction amounts: For 2013, the personal exemption was $3,900 per person, and standard deductions were $6,100 (single), $12,200 (married filing jointly), $8,950 (head of household), and $6,100 (married filing separately).

Step-by-Step (High Level)

Step 1: Calculate your NOL (Schedule A). Complete Schedule A of Form 1045 to determine your actual net operating loss for 2013. Start with your taxable income from Form 1040, line 41, then make required adjustments for items that aren't truly business-related, such as personal exemptions, nonbusiness capital losses, and the standard deduction. The result on Schedule A, line 25, is your NOL available for carryback.

Step 2: Determine carryback years. Based on the type of loss (general, eligible, farming, disaster, or specified liability), identify which prior years you can carry the loss back to. Most taxpayers will carry losses back to 2011 (second preceding year) and 2012 (first preceding year).

Step 3: Complete the carryback computation (Lines 10-27). For each carryback year, you'll create "before carryback" and "after carryback" columns. Enter the original tax information in the "before" column, then refigure your taxable income and tax liability in the "after" column by applying the NOL carryback. This involves recalculating items that depend on adjusted gross income, such as medical expense deductions, miscellaneous itemized deductions, and various phase-outs.

Step 4: Calculate NOL carryover (Schedule B). If your NOL isn't completely absorbed in the first carryback year, use Schedule B to figure how much carries to the next year. This schedule accounts for limitations and ensures you're correctly tracking the unused portion.

Step 5: Gather required attachments. You must attach copies of your 2013 Form 1040 (pages 1 and 2), relevant schedules (A, D, J if applicable), Schedule K-1s from partnerships or S corporations, Form 6251 if AMT is involved, and any forms related to the carryback such as Schedule C (business income/loss) or Schedule F (farm income/loss).

Step 6: Mail to correct service center. File Form 1045 with the IRS service center that corresponds to where you live, as shown in the instructions for your 2013 income tax return. Do not include it in the same envelope as your regular return.

Step 7: Sign and date. All filers must sign the form. If filing jointly, both spouses must sign. Estates require all executors or administrators to sign.

Common Mistakes and How to Avoid Them

Mistake #1: Missing the one-year filing deadline. Many taxpayers miss their window by waiting too long after year-end. Mark your calendar: Form 1045 for 2013 must be filed by December 31, 2014. If you're approaching this deadline, prioritize getting the form filed even if you later need to file Form 1040X to correct details.

Mistake #2: Filing Form 1045 before the original return. The IRS requires that your 2013 Form 1040 be filed on or before the date you file Form 1045. Filing them simultaneously is acceptable, but Form 1045 first creates processing problems. Always ensure the underlying return is filed first or concurrently.

Mistake #3: Incomplete attachments. The instructions explicitly warn that applications "may be delayed or disallowed" without complete attachments. Don't just attach Schedule A—include your full Form 1040 pages 1-2, all relevant schedules, K-1s, and Forms 6251 (if AMT applies). Create a checklist based on page 2 of the 2013 instructions to ensure nothing is missing.

Mistake #4: Incorrect NOL calculation. Schedule A requires careful separation of business and nonbusiness income and deductions. A common error is failing to properly adjust for items like personal exemptions, nonbusiness capital losses, and the domestic production activities deduction. Follow Schedule A line-by-line and reference Publication 536 if uncertain about any categorization.

Mistake #5: Math errors in the carryback computation. When refiguring tax for prior years, you must recalculate AGI-dependent items like medical expenses (which in 2013 used a 7.5% threshold), miscellaneous itemized deductions (2% floor), and various credits. Failing to update these interconnected calculations creates math errors that can trigger disallowance.

Mistake #6: Ignoring Alternative Minimum Tax (AMT) implications. NOL carrybacks can create or increase AMT liability in prior years, even if you had no AMT originally. Always refigure Form 6251 for each carryback year and attach the recalculated forms. The 90% ATNOLD limitation applies differently to qualified disaster losses, adding complexity.

Mistake #7: Applying the wrong carryback period. Not all losses get the same treatment. Carefully categorize your loss components: general losses (2 years), eligible losses (3 years), farming losses (5 years), qualified disaster losses (5 years), and specified liability losses (10 years). Applying a farming loss to the wrong years means leaving money on the table.

Mistake #8: Forgetting to elect to waive carryback when beneficial. Sometimes carrying losses forward is more advantageous—perhaps you expect much higher tax rates in future years or had minimal income in prior years. If you want to waive carryback, the election must be made on a timely filed return (or within six months), not on Form 1045 itself.

What Happens After You File

Once you mail Form 1045 to the appropriate IRS service center, the statutory clock starts ticking. The IRS must process your application 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 of your 2013 return (including extensions).

For a 2013 calendar-year return filed by the April 15, 2014 deadline, the 90-day clock runs from April 30, 2014, if you file Form 1045 before then, or from your actual filing date if later.

During this 90-day window, the IRS reviews your application and supporting documentation. They may contact you or your authorized representative if additional information is needed. If you included Form 2848 (Power of Attorney), the IRS can work directly with your accountant or tax preparer.

If the IRS approves your application, they'll issue a tentative refund. However—and this is crucial—receiving the refund doesn't mean the IRS has accepted your application as fully correct. It's "tentative" because the IRS can later audit the underlying return and recapture any excessive refund with interest and potential penalties.

If the IRS disallows your application in whole or part due to material omissions or math errors, you receive no refund and cannot file suit challenging the disallowance in court. This is a key limitation of Form 1045 compared to Form 1040X. However, you're not out of options: you can still file Form 1040X within the normal three-year statute of limitations to claim the refund through the regular amended return process.

If the IRS later determines the refund was excessive (perhaps through examination), they'll treat it like a math or clerical error assessment. You'll receive a bill for the excessive amount plus interest, and potentially penalties if they find negligence, substantial understatement, or overvaluation.

Processing reality check: While 90 days is the legal requirement, recent IRS backlogs have sometimes extended processing times to six months or longer, particularly during the post-pandemic period. Don't panic if your refund takes longer than expected, but you can follow up with the IRS if you're well past the 90-day mark.

FAQs

Q: Can I e-file Form 1045 for 2013?
A: No. For 2013, Form 1045 must be filed on paper and mailed to the appropriate IRS service center. Electronic filing for Form 1045 became available for the 2024 tax year and later.

Q: What if I carry back an NOL that eliminates my foreign tax credit in a prior year—can I carry that released credit back further?
A: No, Form 1045 cannot be used to carry back released foreign tax credits or general business credits released due to foreign tax credit elimination. You must file Form 1040X (amended return) to claim refunds for those earlier years.

Q: If I file Form 1045 and it's approved, am I protected from audit?
A: No. The "tentative" nature of the refund means the IRS can later examine your return and determine the refund was excessive. You'll need to repay any overclaimed amounts with interest, and penalties may apply for negligence or substantial understatement.

Q: Can married couples who filed separately in some years but jointly in others use Form 1045?
A: Yes, but special rules apply. The instructions reference these situations, and you'll need to carefully follow the guidelines in Publication 536 to properly allocate losses and credits between spouses for different years.

Q: How do I know which IRS service center to mail my Form 1045 to?
A: The correct service center is shown in the instructions for your 2013 Form 1040 based on where you live. Don't use the address for your current state if you moved after 2013—use the address that applied to your 2013 residence.

Q: What happens if I make a mistake on Form 1045 after filing?
A: You cannot amend Form 1045 itself. If the IRS disallows it or you discover errors, file Form 1040X to claim the refund through the standard amended return process. Form 1040X gives you three years from the original return's due date to file.

Q: Can corporations use Form 1045?
A: No. Corporations use Form 1139 (Corporation Application for Tentative Refund) instead. Form 1045 is specifically for individuals, estates, and trusts only.

Source: IRS Form 1045 Instructions (2013) | About Form 1045