Form 1139 (2016 Tax Year) – Checklist
Overview and Filing Purpose
Form 1139 allows corporations to apply for a quick refund of taxes by carrying back net operating losses, net capital losses, or unused general business credits to prior tax years. Corporations must file this form separately from the income tax return. You cannot attach Form 1139 to Form 1120 or any other return. S corporations, partnerships, and trusts are ineligible to use this form because they are pass-through entities.
You must file Form 1139 within twelve months of the end of the tax year in which the net operating loss, net capital loss, unused credit, or claim of right adjustment arose. Your corporation must file its income tax return for the tax year no later than the date you file Form 1139. The IRS will process your application within ninety days of the later of two dates: the date you file the complete application or the last day of the month that includes the due date for filing your income tax return for the year in which the loss or credit arose.
Eligibility and Loss Year Requirements
Corporations must verify qualification to file Form 1139 by identifying the reason for filing on line 1. Acceptable reasons include the following:
- Net operating losses arise from farming or insurance company operations.
- Net capital losses are carried back to prior tax years.
- Unused general business credits become available for carryback.
- Overpayments result from claim of right adjustments under Section 1341(b)(1).
Detailed computations for each claimed item must accompany the application, along with copies of the first two pages of the income tax return. All forms and schedules from which the carryback results must be attached to Form 1139.
Complete line 2 with the exact tax year ended date and Service Center location where you filed the original loss year return. You should obtain a copy of that return for reference when preparing Form 1139. If the loss or credit originated from a carryback chain, document the tax year of the first carryback on line 3 to prevent double-carryback claims under Section 172(b) net operating loss rules.
Consolidated Returns and Special Situations
Answer line 5a regarding consolidated return status if your corporation was part of a consolidated group for any carryback year. You must provide the common parent name and employer identification number on line 5b. All consolidated computations require support from the consolidated group's records. If you filed Form 1138 for an extension of time for payment of tax, indicate "Yes" on line 6a and complete lines 6b through 6d with the extension date and unpaid tax amount, then attach a copy of the approved Form 1138.
Required Disclosures and Documentation
Complete the following disclosure requirements on Form 1139:
- Disclose any accounting period change on line 7 and attach documentation of IRS approval because net operating loss carryback computations must align with actual tax year boundaries.
- Report the dissolution date on line 8 if applicable, as a dissolved corporation must still file Form 1139, but must include evidence of dissolution and ensure no subsequent tax liability exists for the carryback years.
- Answer line 4 regarding foreign tax credit release or general business credit release resulting from foreign tax credit adjustments, and if you answer "Yes," file amended returns using Form 1120-X for all affected carryback years.
- Confirm on line 9 whether any Tax Court petition has been filed for the carryback years because Form 1139 cannot be processed until the Tax Court case is resolved.
- Determine on line 10 whether any loss or credit results from a reportable transaction by attaching Form 8886 if required under Section 6011.
Computation of Decrease in Tax
Complete the Computation of Decrease in Tax section for lines 11 through 28 for each carryback year using the following procedure:
- Enter amounts for the applicable carryback year as shown on your original or amended return or as adjusted by the IRS in columns (a), (c), and (e).
- Use columns (a) and (b), (c) and (d), or (e) and (f) to enter amounts before and after carryback for each year to which you carry the loss.
- Start with the earliest carryback year and use the remaining pairs of columns for each consecutive preceding year until the loss is fully absorbed.
When completing lines 16 through 26, include any adjustments that appeared on your original return. Refigure income tax after taking into account the carrybacks in columns (b), (d), and (f). Attach a computation of the refigured tax and take into account Section 1561 when refiguring the income tax. For the alternative minimum tax on line 17, complete and attach Form 4626 for the appropriate tax years before 2018.
Base Erosion Minimum Tax Considerations
Line 18 addresses the base erosion minimum tax for corporations with average annual gross receipts exceeding $500 million for the three preceding tax years. This tax applies only to taxable years beginning after December 31, 2017. If you are refiguring tax for a carryback year beginning in 2018 or later, you must complete Form 8991 and attach it to Form 1139 if your corporation meets the applicable taxpayer thresholds for that carryback year.
General Business Credit and Other Items
Enter the total of corrected general business credits in columns (b), (d), and (f) on line 20. Attach all applicable forms used to redetermine the general business credit. If a net operating loss carryback or net capital loss carryback eliminates or reduces a general business credit in an earlier tax year, the released general business credit can be carried back one year. See the corporation's tax return for the carryback year for any additional credits that apply on line 21, and attach a statement identifying the credits claimed if you make any entry on that line.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
