What Form 1045 Is For

If your business or personal finances took a hit in 2018, leaving you with more deductions than income, Form 1045 might be your ticket to getting money back from Uncle Sam—and getting it fast. This IRS form is designed to help individuals, estates, and trusts apply for a quick tax refund when certain losses or credits from one year can be "carried back" to offset income from previous years. Think of it as a way to smooth out the bumps in your financial road by letting losses from bad years reduce the taxes you paid in better years.

Form 1045, officially titled "Application for Tentative Refund," serves as your express lane to claiming tax refunds based on specific financial situations. The form handles four primary scenarios, though the most common by far is the first one:

Net Operating Loss (NOL) Carryback: This is the big one. If your business deductions and losses exceeded your income in 2018, creating a Net Operating Loss, you can carry that loss backward to previous tax years when you had taxable income. The IRS will then recalculate those earlier years' taxes as if you'd had less income, resulting in a refund. For 2018 losses, special rules implemented under the CARES Act of 2020 (more on this later) allow you to carry losses back up to five years, potentially reaching as far back as 2013.

Unused General Business Credit Carryback: If you qualified for certain business tax credits in 2018 but couldn't use them all because your tax liability was too low, you can carry the unused portion back one year to 2017. This includes credits for things like hiring employees from targeted groups, producing biofuels, or investing in renewable energy.

Net Section 1256 Contracts Loss Carryback: If you traded regulated futures contracts, foreign currency contracts, or certain options and ended 2018 with a net loss from these activities, you can carry that loss back three years to reduce capital gains from 2015.

Claim of Right Adjustment: This applies to the unusual situation where you had to repay income in 2018 that you'd reported and paid taxes on in a previous year (for example, if you received a bonus in 2016 but had to return it in 2018 due to a contract dispute). You can recalculate your earlier year's taxes without that income.

The key advantage of Form 1045 over the alternative Form 1040-X (Amended U.S. Individual Income Tax Return) is speed. The IRS is required to process Form 1045 within 90 days, whereas amended returns typically take six months or longer. IRS.gov

When You’d Use Form 1045 (Including Late and Amended Filings)

Form 1045 isn't a substitute for filing your regular tax return—it's filed after you've completed your 2018 return. Here's the typical sequence:

Step 1: File your regular 2018 tax return (Form 1040) showing your loss or unused credit. You must file this return on or before the date you submit Form 1045. If you haven't filed your 2018 return yet, you cannot file Form 1045.

Step 2: Calculate whether carrying the loss or credit backward will generate a refund from previous years' taxes.

Step 3: Complete Form 1045 and submit it within the allowable timeframe (discussed below).

The One-Year Rule—With Important 2018 Extensions: Generally, you must file Form 1045 within one year after the end of the tax year in which the loss or credit arose. For a calendar-year taxpayer with a 2018 NOL, that would normally mean filing by December 31, 2019.

However, 2018 is special. The CARES Act, passed in March 2020, dramatically changed NOL rules retroactively, creating new opportunities for 2018 losses. Recognizing that taxpayers couldn't have anticipated these changes, the IRS issued Notice 2020-26, extending the filing deadline for 2018 NOL carryback claims. Calendar-year taxpayers had until June 30, 2020, to file Form 1045 for 2018 losses—18 months instead of the usual 12. IRS Instructions for Form 1045, 2018

Late Filers: If you missed the Form 1045 deadline, all is not lost. You can still file Form 1040-X (Amended U.S. Individual Income Tax Return) to claim the carryback refund, but you'll sacrifice the 90-day processing guarantee. You generally have three years from the original due date of the return being amended to file Form 1040-X, giving you more time but less certainty about when you'll see your money.

When NOT to Use Form 1045: You must use Form 1040-X instead of Form 1045 if you're carrying back losses or credits to a year with a Section 965 inclusion (a special provision related to foreign earnings repatriation), or if you're claiming prior-year foreign tax credits or general business credits that were "released" by an NOL carryback. These situations require the amended return process.

Key Rules or Details for 2018

The year 2018 sits at a unique crossroads in tax history, affected by both the Tax Cuts and Jobs Act (TCJA) of 2017 and the CARES Act of 2020. Understanding these rules is crucial for maximizing your refund:

The Five-Year Carryback: Originally, the TCJA eliminated NOL carrybacks for most taxpayers for losses arising after 2017 (except for farming losses). However, the CARES Act reversed course in March 2020, retroactively allowing 2018, 2019, and 2020 NOLs to be carried back five years instead of the previous two-year limit. For a 2018 loss, this means you can potentially carry it back to 2013, 2014, 2015, 2016, and 2017—giving you five bites at the refund apple. You must apply the loss to the earliest year first (2013), then move forward year by year until the loss is fully absorbed or you run out of carryback years.

No Personal Exemptions for 2018: The TCJA suspended personal exemptions ($4,050 per person in 2017) for tax years 2018 through 2025. When calculating your 2018 NOL on Schedule A of Form 1045, you won't factor in personal exemptions, unlike in earlier carryback years. However, when applying your 2018 loss to, say, 2013 through 2017, those years still used personal exemptions, which affects the math of how much tax reduction you'll get.

No Excess Business Loss Limitation for 2018: The TCJA originally imposed a limit on business losses that noncorporate taxpayers could claim—capping them at $250,000 ($500,000 for joint filers) for tax years 2018-2025. However, the CARES Act repealed this limitation for 2018, 2019, and 2020, postponing it until 2021. This means 2018 business losses aren't artificially capped, potentially making your NOL larger and your refund bigger. If you filed your 2018 return before the CARES Act and applied this now-repealed limitation, you should have filed an amended return to remove it.

Waiving the Carryback: You can elect to skip the carryback process entirely and only carry your 2018 NOL forward to future tax years (where you can use it indefinitely). To make this election, you must attach a statement to your original 2018 return filed by the deadline (including extensions). If you filed on time without this statement, you can still make the election on an amended return filed within six months of the original due date (excluding extensions), writing "Filed pursuant to section 301.9100-2" at the top. Once you waive the carryback, the decision is generally irrevocable, so think carefully.

Excluding Section 965 Years: Under the TCJA, many taxpayers with foreign business interests had a one-time "Section 965" inclusion—essentially taxable foreign earnings brought back to the U.S. Under the CARES Act, you can elect to skip over any Section 965 years when carrying back your 2018 NOL. For example, if you have Section 965 income in 2016, you could carry your 2018 loss to 2013, 2014, 2015, and 2017, jumping over 2016. This election is made on Form 1045 itself or via procedures outlined in Revenue Procedure 2020-24.

Step-by-Step (High Level)

Filing Form 1045 involves careful calculation and documentation. Here's the roadmap:

Step 1: Complete Your 2018 Tax Return First

File Form 1040 showing your 2018 income, deductions, and resulting NOL or unused credit. Calculate any NOL on your tax software or with the help of a tax professional. The loss typically shows up when your total deductions exceed your total income.

Step 2: Fill Out Schedule A of Form 1045

This schedule calculates your actual NOL by making specific adjustments to your taxable income. You'll add back certain non-business deductions (like your standard deduction, itemized deductions not connected to business, and investment interest), capital losses, and other items. The result on Schedule A, line 25, is your NOL available for carryback.

Step 3: Determine Carryback Years

Decide which previous years you're carrying the loss to. For most 2018 situations, you'll start with 2013 (five years back) and work forward through 2017, though you can elect to skip Section 965 years if applicable.

Step 4: Complete the Main Form (Lines 10–32)

This is where the magic happens. You'll create pairs of columns—one pair for each carryback year. In each pair, you'll show the "Before carryback" amounts (what you originally reported for that year) and "After carryback" amounts (what those numbers become after applying the 2018 loss). You'll recalculate adjusted gross income, deductions, exemptions (for pre-2018 years), taxable income, income tax, credits, and other tax items for each carryback year.

Step 5: Fill Out Schedule B (If Necessary)

If your NOL is large enough that it isn't fully absorbed by the first carryback year, you'll use Schedule B to calculate the remaining loss to carry to the next year. The calculation involves "modified taxable income" adjustments that prevent certain items from being counted twice.

Step 6: Gather Required Attachments

This is critical. You must attach copies of pages 1 and 2 of your 2018 Form 1040, plus all relevant schedules (Schedules 1–6, A, D, F, J if applicable), Schedule K-1s from partnerships or S corporations contributing to the loss, Form 461 (Limitation on Business Losses), and any other forms related to the loss or credit. Missing attachments can delay or derail your application.

Step 7: Sign and Mail

Both spouses must sign if filing jointly. Mail the completed Form 1045 with all attachments to the IRS Service Center for your area (listed in the Form 1045 instructions). Do not include Form 1045 in the same envelope as your 2018 tax return—they go to different processing locations.

Step 8: Track the 90-Day Clock

The IRS must process your application within 90 days from the later of: (a) when you file the complete application, or (b) the last day of the month containing your 2018 return's due date (including extensions). If you filed for an extension to October 15, 2019, the clock starts October 31, 2019, even if you submitted Form 1045 earlier.

Common Mistakes and How to Avoid Them

Filing Form 1045 Before Your 2018 Return: The instructions are explicit: you cannot file Form 1045 before or on the same date as your 2018 income tax return. If you do, the IRS will reject your application. Always file the underlying return first, wait at least one day, then submit Form 1045.

Missing or Incomplete Attachments: This is the #1 cause of processing delays. The IRS cannot process your application without copies of your 2018 Form 1040, relevant schedules, Schedule K-1s, and documentation of how you calculated the loss. Create a checklist from the "What to Attach" section of the instructions and verify you have everything before mailing.

Math Errors in Schedule A or B: Calculating an NOL involves complex adjustments—adding back non-business deductions, excluding certain capital losses, refiguring AGI-based limitations. One wrong number cascades through the entire form. Use tax software or work with a professional who has experience with NOL calculations. Double-check every line.

Forgetting to Adjust AGI-Dependent Items: When your carryback reduces the adjusted gross income in a prior year, certain deductions and credits that are based on AGI percentages must be refigured. These include medical expenses (7.5% of AGI floor), miscellaneous itemized deductions (2% of AGI floor for pre-2018 years), IRA deductions, student loan interest, and many others. Failing to recalculate these items results in incorrect tax refund amounts.

Not Considering Alternative Minimum Tax (AMT): Carrying back an NOL can trigger or increase AMT liability in a prior year, even if you didn't owe AMT originally. The AMT system has its own set of deduction rules that differ from regular tax. If you had significant itemized deductions, exercised incentive stock options, or had other AMT preference items in carryback years, consult a tax professional about potential AMT impacts.

Missing the Filing Deadline: While the extended deadline for 2018 NOLs was June 30, 2020 (already passed), understanding deadline rules helps if you discover an error or have losses from other years. Mark the one-year anniversary of your tax year's end on your calendar, and build in buffer time for preparation. If you miss the Form 1045 deadline, immediately investigate filing Form 1040-X instead.

Assuming All Business Losses Create NOLs: Not all business losses qualify for NOL treatment. The loss must meet specific criteria, including being from a genuine trade or business (not a hobby), being properly documented, and not being limited by passive activity rules or basis limitations from partnerships/S corporations. Verify your loss qualifies before spending time on Form 1045.

Ignoring State Tax Implications: Form 1045 is a federal form. If you're carrying back a federal NOL, you may also have state NOL carryback opportunities, but state rules vary widely. Some states conform to federal NOL rules, others don't allow carrybacks at all, and still others have different carryback periods. Check with your state's tax authority or a tax professional about state-level refund claims.

What Happens After You File

90-Day Processing Period: The IRS is legally required to either allow or disallow your application within 90 days from the later of your filing date or the last day of the month containing your 2018 return's due date. This is significantly faster than the six-month-or-longer processing time for Form 1040-X.

Tentative Refund Check: If approved, you'll receive a refund check (or direct deposit if you filed Form 8302 for refunds of $1 million or more) for the decrease in tax shown on your Form 1045. The refund check typically arrives within the 90-day window.

"Tentative" Means Temporary: Here's the critical point many taxpayers miss: receiving your refund does not mean the IRS has accepted your application as correct or that the matter is closed. The refund is "tentative"—essentially a loan that the IRS will verify later. The IRS has the full three-year statute of limitations (or longer if you have underreported income or fraud) to audit your 2018 return and your Form 1045 calculations.

Later Examination and Adjustment: The IRS can examine your NOL computation, carryback calculations, and all underlying tax returns involved. If they determine you overstated the NOL or made errors in the carryback application, they'll assess additional tax, plus interest compounded daily from the refund date. If the errors were due to negligence, overvaluation of property, or substantial understatement of income, penalties may apply.

No Court Challenge to Disallowance: If the IRS disallows your Form 1045 application within the 90-day period (either fully or partially), you cannot take them to court over the disallowance. However, you can file Form 1040-X for the same carryback claim before the statute of limitations expires. If the IRS also disallows your Form 1040-X, you can challenge that in court—but only after waiting for either six months or a formal disallowance notice, and you must file suit within two years of the disallowance.

IRS May Contact You for More Information: During the 90-day processing period, IRS personnel may call or write requesting additional documentation, clarification, or supporting schedules. Respond promptly to avoid delays. If you listed a representative on Form 2848 (Power of Attorney), they'll contact your representative instead of you directly.

Interest on Refunds: Generally, you won't receive interest on your tentative refund if the IRS issues it within 45 days of receiving your Form 1045. If processing takes longer than 45 days, interest begins accruing from the original due date of the loss year (typically April 15, 2019, for calendar-year 2018 filers).

FAQs

1. Can I file Form 1045 electronically?

As of the 2018 tax year, Form 1045 generally could not be e-filed. However, during the COVID-19 pandemic, the IRS temporarily allowed faxing of Form 1045 for certain CARES Act NOL carryback claims through December 31, 2020. For 2018 losses filed after that date or without CARES Act provisions, you must mail a paper form. The IRS has announced that Form 1045 will become available for e-filing starting with 2024 returns (filed in 2025).

2. How does Form 1045 differ from Form 1139 for corporations?

Form 1045 is for individuals, estates, and trusts. Corporations use Form 1139 (Corporation Application for Tentative Refund) for the same purpose. The conceptual framework is identical—both provide quick refunds for carrybacks—but the forms differ because corporations and individuals calculate taxable income differently. If you operate as a C corporation, you'll use Form 1139, not Form 1045.

3. What if my NOL is too large to be absorbed by all five carryback years?

After carrying your 2018 NOL back through all available prior years (2013-2017), any remaining unused loss carries forward indefinitely to 2019, 2020, 2021, and beyond. For losses arising in 2018 or later, there's no expiration date on carryforwards—you can keep using the loss against future income until it's fully absorbed. You'll report the carryforward amount on your future tax returns.

4. Can I file Form 1045 if I'm currently being audited for a carryback year?

Yes, you can file Form 1045 even if the IRS is currently auditing one of your carryback years (say, 2015). However, your application will be calculated based on the "tax previously figured" for that year—meaning the tax shown on your original return, plus any deficiencies assessed, minus any refunds already issued. If the audit is ongoing, you may want to wait until it's resolved to avoid filing multiple amended applications. There's no prohibition on filing during an audit, but it may complicate matters.

5. What happens if I later discover an error in my Form 1045?

You cannot amend Form 1045. If you realize you made a mistake after filing—whether it's an error in your favor or the IRS's—you'll need to file Form 1040-X (Amended U.S. Individual Income Tax Return) for each affected carryback year. Form 1040-X allows you to correct errors and goes through the regular refund claim process, though it lacks the 90-day processing guarantee of Form 1045.

6. Should I hire a tax professional for Form 1045, or can I do it myself?

Form 1045 is one of the most complex IRS forms available. It requires calculating an NOL (which itself involves numerous adjustments), understanding carryback ordering rules, refiguring multiple prior years' tax returns, adjusting AGI-dependent items, considering AMT implications, and properly documenting everything. If your NOL is substantial (generating a refund of $10,000 or more), involves multiple business entities, or includes complicated items like passive activities or Section 965 elections, hiring a CPA or enrolled agent experienced in NOL carrybacks is almost certainly cost-effective. For simple situations with smaller losses and straightforward tax returns, tax software with NOL support may suffice.

7. Can I carry back a 2018 loss if I'm now in bankruptcy?

Yes, bankruptcy doesn't prevent you from filing Form 1045, but the refund becomes property of the bankruptcy estate if you're in an active Chapter 7 or Chapter 13 bankruptcy. You should notify your bankruptcy trustee about the anticipated refund, and the trustee may need to amend your bankruptcy schedules. In some cases, you may be able to exempt the refund under applicable bankruptcy law, but this is highly fact-specific. Consult with both a tax professional and a bankruptcy attorney before filing Form 1045 if you're in bankruptcy.

Sources:

IRS Form 1045 About Page
IRS Instructions for Form 1045 (2018)
IRS Publication 536 - Net Operating Losses