What IRS Form 1139 (2023) Is For
IRS Form 1139 enables a corporation to request a tentative refund from the IRS when it incurs financial losses or has unused credits. This corporation application provides a faster option than filing an amended return. Corporations use the form to apply for a quick refund after a net operating loss, a net capital loss, or an unused general business credit. The request is mailed separately to the IRS Service Center where the corporation files its income tax return.
When You’d Use IRS Form 1139
Corporations submit Form 1139 when they incur losses or accumulate credits from previous years. A corporation may file for a quick refund if a net operating loss, net capital loss, unused general business credit, or claim of right adjustment arose during the loss year. Before submitting the tentative refund request, the IRS requires the corporation to file its income tax return for the prior year. Corporations must send the tax form to the correct Internal Revenue Service Center within twelve months after the tax year in which the loss or credit arose.
Key Rules or Details for 2023 Tax Year
- NOL Carryback Rules: For tax years beginning after December 31, 2020, only farming losses and certain insurance company losses (other than life insurance companies) qualify for an NOL carryback period. Other corporations must carry NOLs forward to the next tax year.
- NOL Deduction Limitation: The NOL deduction for most corporations is limited to 80% of taxable income, calculated without considering the NOL deduction or special deductions.
- Net Capital Loss Carryback: A corporation may carry back a net capital loss for up to three years to offset prior gains. Any unused amount is carried forward until fully absorbed.
- Unused General Business Credit: Unused credits can typically be carried back one year and carried forward to offset tax in later years.
- Claim of Right Adjustment: If a corporation repaid income reported in an earlier year, it may recover the overpayment by filing Form 1139.
- Filing Method: The form must be mailed separately to the IRS Service Center listed on the IRS website and cannot be filed electronically.
- Processing Time: The IRS generally processes a complete corporation application for a tentative refund within ninety days after it is filed.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: File the Original Income Tax Return
Before filing Form 1139, the corporation must first file its corporate return, such as Form 1120. The tentative refund application cannot precede the original filing, since the IRS verifies information from the corporation’s income tax return.
Step 2: Gather Required Documents
Attach the first two pages of the loss-year corporate return, all carryback year forms, and supporting schedules, such as Schedule D for capital losses. Include Form 3800 for business credits and any applicable elections.
Step 3: Complete Identification Details
Enter the corporation’s name, employer identification number, and street address in the spaces provided. If the mail is not delivered to the street address, list a P.O. box instead. Accuracy ensures correspondence from the IRS Service Center reaches the correct location.
Step 4: Calculate Carryback Amounts
Enter the carryback amounts for the net operating loss, net capital loss, unused credit, or other adjustments. Identify the earliest carryback year and continue applying losses until fully absorbed in prior years.
Step 5: Compute the Tentative Refund
Use the computation section to refigure taxable income for each carryback year. Determine the overpayment by comparing the refigured tax to the prior year’s liability. The corporation should confirm that the carryback period calculations comply with current IRS NOL carryback rules.
Step 6: Sign and Submit to the IRS Service Center
An officer of the corporation must sign the form under penalties of perjury. The completed IRS Form 1139 should be mailed separately to the Internal Revenue Service Center where the corporation files its regular tax return.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Filing Before the Original Return: Some corporations submit Form 1139 before filing their corporate return. To avoid rejection, always file the corporation’s income tax return first.
- Missing the 12-Month Deadline: Filing after the deadline renders the request invalid. To prevent delays, mark the filing due date on your calendar and submit the form well in advance.
- Incorrect Carryback Amounts: Miscalculating NOL deductions or carryback amounts can result in overpayment errors. Review all figures using IRS worksheets before submitting.
- Incomplete Attachments: Missing carryback year forms or schedules delay processing. Prepare a checklist based on the IRS instructions to confirm that all required attachments are included.
- Incorrect Mailing Address: Applying to the incorrect Internal Revenue Service Center can cause processing delays. Verify the correct mailing address on the IRS website.
- Using Form 1139 for Ineligible Entities: S corporations are ineligible to file Form 1139. Be sure to verify eligibility, because only C corporations and certain insurance companies are eligible to request a tentative refund.
- Math Errors in Computations: Incorrect refiguring of taxable income or credits can cause disallowance. Use reliable tax software or a professional review to ensure accuracy.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
The IRS must process a complete Form 1139 within ninety days of the later of the filing date or the end of the tax year in which the credit or loss arose. After review, the IRS may issue a full refund, partial refund, or disallowance. If disallowed, the corporation may pursue the claim through an amended return, such as Form 1120X or another amended return. Interest applies if excessive refunds are later deemed to be incorrect. Corporations should retain all carryback documentation and prior-year schedules for a minimum of three years after filing.
FAQs
Can I file IRS Form 1139 electronically for a quick refund?
No, Form 1139 must be mailed separately to the IRS Service Center where the corporation files its corporate return. Electronic filing is not available for tentative refund claims.
What are the NOL carryback rules for tax years beginning after 2020?
For tax years beginning after December 31, 2020, most corporations cannot carry NOLs back. Only farming losses and certain insurance companies can apply a two-year carryback period.
Can an S corporation use IRS Form 1139 to claim a refund?
No, an S corporation is not eligible to file Form 1139 because its income and losses are passed through to its shareholders. Only C corporations may submit this corporation application.
Where should I include my Employer Identification Number (EIN) and street address?
You should enter both in the identification section on Form 1139, using the spaces provided. Ensure your street address is up-to-date so the IRS can send refund notices.
How are carryback amounts applied under the NOL carryback rules?
Losses are applied first to the earliest carryback year. Any unused amount is carried to the next tax year until the NOL is fully absorbed.
Can I use Form 1139 to claim a capital loss carryback?
Yes, corporations may file Form 1139 to apply a net capital loss carryback. This allows them to offset prior capital gains and receive a faster refund than they would with an amended return.
