What IRS Form 1139 Is For
IRS Form 1139 allows a corporation to apply for a tentative refund when it experiences a net operating loss, net capital loss, or unused general business credit. The form provides a quick alternative to filing an amended income tax return, helping businesses recover cash flow more efficiently. A corporation files this tax form when it needs to carry back losses incurred or unused credit amounts to prior years. The IRS processes these applications through its Internal Revenue Service Center, usually within 90 days, allowing corporations to receive a quick refund instead of waiting for months under normal procedures.
When You’d Use IRS Form 1139
Corporations use Form 1139 within 12 months after the end of the loss year to apply for a tentative refund. The corporation’s income tax return must be filed concurrently with or before the refund application, as the IRS will not process it otherwise. A corporation application may involve a net operating loss, a net capital loss carryback, or unused credits that need to be carried forward or applied to prior years. If a corporation misses the filing date, it can file an amended tax return instead. However, the quick refund process applies only to losses and credits claimed within the allowed carryback period.
Key Rules or Details for the 2022 Tax Year
- NOL Carryback Rules: Most net operating loss carrybacks are no longer allowed for tax years beginning after December 31, 2020. However, special rules still apply to farming losses and insurance companies, except for life insurance companies.
- Capital Loss Carryback: Corporations may carry back a net capital loss for up to three years and carry it forward for up to five years, applying Schedule D calculations to determine the correct tax decrease.
- General Business Credit: Any unused general business credit can be carried back one year or carried forward up to twenty years. This rule remained unchanged for the 2022 tax year.
- Alternative Minimum Tax: Corporations must recalculate the alternative minimum tax when a carryback or adjustment occurs, as it may impact the tentative refund calculation.
- Foreign Tax Credits: Form 1139 cannot be used to carry back foreign tax credits released by a net operating loss. Those adjustments require a formal amended income tax return instead.
- Filing Deadlines: The IRS service center must receive the form within 12 months of the end of the tax year in which the loss occurred. Missing this deadline makes the tentative refund ineligible for processing.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: File the Original Return
A corporation must first file its income tax return for the loss year before submitting Form 1139. The IRS will not consider the refund claim until the original return is on file.
Step 2: Gather Supporting Documents
The corporation must attach the first two pages of its tax return, including Schedule D and any other relevant schedules used to calculate deductions or credits. Additional information, such as recomputed figures for each carryback year, should be included.
Step 3: Complete Form 1139
Corporations calculate changes in taxable income and alternative minimum tax for each carryback year to determine the tentative refund amount. The appropriate lines of the form indicate the decrease in tax.
Step 4: File Form 1139 Separately
Form 1139 must be mailed separately to the IRS service center where the corporation normally files returns. It should not be attached to the regular income tax return. The IRS website provides address details for each location.
Step 5: Wait for Processing
Once filed, the IRS reviews the claim within 90 days. If approved, the IRS issues the tentative refund either by check or electronic deposit.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Filing for Ineligible Losses: Some corporations incorrectly include losses incurred in tax years beginning after December 31, 2020, which are not eligible for carryback. To avoid rejection, verify whether the loss qualifies under current NOL carryback rules.
- Missing the 12-Month Deadline: Late filings automatically disqualify the tentative refund request. Corporations should record the end of their taxable year and submit the form several weeks before the due date.
- Incomplete Attachments: Missing pages or schedules often delay processing. To prevent this, attach every required form, including Schedule D, the summary of the income tax return, and any adjustment calculations.
- Incorrect Tax Calculations: Errors in computing the decrease in tax or deductions can cause disallowance. Corporations should double-check their figures or use tax software to ensure accuracy.
- Forgetting to File the Original Return: The IRS will not review a tentative refund unless the loss-year tax return is already filed. Corporations must file both the tax return and Form 1139 on time.
- Ignoring Right Adjustment Claims: If a right adjustment arose from income repaid in later years, include it properly in the computation. Always refer to the IRS instructions to ensure accurate reporting.
- Failing to Retain Documentation: Since refunds are tentative, the IRS may review them at a later time. Retain copies of all forms, adjustments, and correspondence to defend the refund claim if necessary.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After the IRS service center receives the complete corporation application, it reviews the figures and verifies the loss year documentation. Within 90 days, the IRS either issues the refund, requests additional information, or disallows the claim. A tentative refund may later be reviewed or reversed if an error is found. If the IRS issues an overpayment, it may recover the amount along with penalties and interest. Corporations should always maintain full records to support the deductions, losses, and adjustments reported on Form 1139.
FAQs
Can I e-file IRS Form 1139 for a tentative refund?
No, IRS Form 1139 must be mailed to the appropriate Internal Revenue Service center. Corporations cannot electronically file the tentative refund form for the 2022 tax year.
How does IRS Form 1139 handle a net operating loss?
Corporations report their net operating loss on Form 1139 to apply it to prior years. However, for tax years beginning after December 31, 2020, most carrybacks are limited to farming losses and insurance companies.
How does the alternative minimum tax affect the tentative refund?
When calculating a tentative refund, corporations must recompute the alternative minimum tax for each carryback year. This recalculation guarantees the application of the correct tax decrease across the affected years.
Can a corporation apply a capital loss carryback on IRS Form 1139?
Yes, a net capital loss can be carried back three years using Schedule D calculations. Any remaining capital loss can be carried forward up to five years to offset future income.
What happens if a corporation files Form 1139 late in the tax year?
If the corporation files after the 12-month deadline, the IRS will reject the tentative refund claim. The corporation must then use an amended income tax return to request a refund instead.
