What IRS Form 1045 (2018) Is For
IRS Form 1045 (2018) enables taxpayers to request a swift tax refund by carrying back net operating losses (NOLs) or unused credits from the 2018 tax year. This form is available to individuals, businesses, estates, and trusts that experienced losses in 2018, allowing them to adjust taxable income from prior years. Submitting Form 1045 allows taxpayers to reduce their tax liability for prior tax years, resulting in a quicker refund compared to filing an amended return (Form 1040-X).
This form also facilitates the carry-forward of NOLs to future years, providing a flexible method for addressing financial losses. The IRS process through Form 1045 helps ensure that taxpayers recover taxes paid in years when they had a higher income.
When You’d Use IRS Form 1045 (2018)
IRS Form 1045 is primarily used when taxpayers have incurred a net operating loss (NOL) in the tax year, allowing them to apply a carryback to reduce their tax liability for previous years. This form is applicable for individuals, businesses, estates, and trusts that experienced losses in 2018, especially when the NOL arises from farming losses or casualty losses. Taxpayers may apply the carryback provision to offset taxable income from prior tax years, potentially resulting in a refund.
The NOL carryover period enables taxpayers to carry losses forward to future years, further reducing taxable income and taxes. For most taxpayers, the 1045 application for a tentative refund offers a quick and efficient method to recalculate total tax liability for prior years. This process benefits those with significant losses, including those from qualified business income or certain modifications.
Key Rules or Details for 2018
The key rules for 2018 concerning IRS Form 1045 are influenced by changes in tax laws, particularly the Tax Cuts and Jobs Act (TCJA) and the CARES Act. The TCJA introduced limitations on net losses, while the CARES Act allowed NOLs arising in the 2018 tax year to be carried back up to five years instead of two, providing more flexibility in tax relief. This change allows taxpayers to reduce income tax liability from prior years, resulting in a quick refund.
For individuals and businesses with significant losses, including farming losses and qualified small business stock, the NOL carryforward and carryback rules are crucial. NOL carryforwards apply when losses are not fully absorbed in the carryback period and can be used to offset future taxable income. Taxpayers must also consider special considerations, such as modifications related to the alternative minimum tax and certain exceptions for nonbusiness income.
Step-by-Step (High Level)
Follow these steps to file IRS Form 1045 and claim your refund properly. For more information on IRS assistance, see our comprehensive guide.
- File Your Original Tax Return First: You must file your 2018 tax return (Form 1040) before submitting Form 1045. The form cannot be filed simultaneously with your return. Make sure your income, deductions, and credits are reported accurately.
- Calculate Your NOL or Credit: It is important to determine whether a net operating loss (NOL) exists for the 2018 tax year or if there is an unused business credit. Fill out Schedule A of Form 1045 to calculate the NOL and the carryback amount.
- Complete and Submit Form 1045: After filling out the form, attach the 2018 return, Schedule A, and any necessary documents before submission. The completed form should be submitted to the correct IRS service center, and a copy must be retained for your records.
This process ensures that your NOL is properly carried back, allowing for a potential tax refund.
Common Mistakes and How to Avoid Them
It is essential to avoid errors when filing IRS Form 1045 to ensure a smooth process and a prompt refund. Below are common mistakes and practical steps to prevent them.
Common Mistakes and How to Avoid Them
1. Filing Form 1045 Too Early
- How to Avoid It: Submit Form 1045 only after completing your 2018 tax return to ensure all information is accurate and finalized.
2. Incorrect NOL Calculations
- How to Avoid It: Double-check all losses, including NOLs from prior tax years, and ensure Schedule A is completed correctly.
3. Missing Required Attachments
- How to Avoid It: Attach all necessary documents—such as Form 1040 and related schedules—to avoid delays in processing.
4. Failure to Adjust for AGI Items
- How to Avoid It: Recalculate itemized deductions and credits after applying the NOL to your adjusted gross income.
5. Overlooking State-Specific Rules
- How to Avoid It: Verify state-specific NOL carryback rules to ensure consistency between federal and state filings.
Avoiding these mistakes ensures compliance, accuracy, and faster processing of your claim.
What Happens After You File
Once you submit Form 1045, the IRS will process your application within 90 days, which is faster than an amended return. If approved, you will receive a tentative refund based on the adjusted tax liability from previous tax years. The refund is provisional, meaning it is subject to further review by the IRS.
If the IRS finds any discrepancies or issues, they may contact you for additional documentation or clarification. The IRS will also review your NOL deductions, and if necessary, it will notify you of any adjustments. The tentative adjustment can be subject to audit, so it is essential to keep all supporting documents and records.
This process ensures that the IRS evaluates your NOL carryback claim efficiently while permitting corrections when necessary. Taxpayers who need additional federal resources can review the federal fillable tax forms and the IRS Form Help Center.
FAQs
What is a Net Operating Loss (NOL) and how is it calculated?
A net operating loss (NOL) occurs when deductions exceed taxable income. This can include business, casualty, or farming losses. NOLs can be carried back to offset past income or carried forward to future years.
How does the NOL carryback and carryforward process work?
NOLs can be carried back to previous tax years or carried forward to future years. For losses in the 2018 tax year, the carryback period extends to five years, instead of the usual two. Remaining NOLs can be carried forward indefinitely to reduce future taxable income.
When can I use IRS Form 1045 for a tentative refund?
IRS Form 1045 can be used when you have an NOL for the 2018 tax year and wish to apply it to reduce tax liability from prior years. The form allows for a faster refund than filing an amended return.
What are the tax years affected by NOL carrybacks and carryforwards?
NOL carrybacks apply to tax years ending in the previous five years. After the carryback period, NOLs can be carried forward to future years to offset taxable income. This helps reduce overall tax liability.
Should I consult tax professionals when filing for NOL carrybacks or carryforwards?
Consulting tax professionals is recommended due to the complexity of NOL calculations and carryback rules. They can help ensure accurate filing, including necessary adjustments to your modified adjusted gross income and tax attributes.
Filers can use Federal Fillable Tax Forms to confirm which additional filings may support the tentative refund request.
