What IRS Form 1139 (2010) Is For
IRS Form 1139 (2010) allows corporations to apply for a quick refund of taxes previously paid. It serves as a corporate application for a tentative refund. It is typically used when a company experiences a net operating loss, a net capital loss, an unused general business credit, or an overpayment resulting from a claim of proper adjustment.
This form is not available for S corporations. It is designed explicitly for C corporations that want to recover taxes from earlier years without waiting for a lengthy amended return process. When properly filed, the Internal Revenue Service generally processes the application within 90 days, providing faster access to funds compared to filing Form 1120X.
When You’d Use IRS Form 1139
Corporations use IRS Form 1139 to request a quick refund after reporting a net operating loss, unused general business credit, or overpayment. The form allows these amounts to be carried back to prior tax years to reduce taxable income and recover overpaid taxes faster than through an amended return. It must be filed within 12 months after the end of the loss year, and the corporation’s income tax return for that year must be filed before or with the application.
Key Rules or Details for 2010
The 2010 tax year included temporary provisions under the Worker, Homeownership, and Business Assistance Act that extended the carryback period for net operating losses from two years to up to five years. Corporations electing the five-year carryback could apply only up to 50 percent of taxable income in the fifth year, with any remaining loss carried forward indefinitely. The law also suspended the 90 percent limitation on alternative minimum taxable income, thereby reducing the minimum tax exposure for corporations that utilize extended carrybacks. These rules allowed businesses to recover prior tax payments more effectively and improve cash flow during the economic downturn.
Step-by-Step (High Level)
Step 1: Calculate the net operating loss (NOL)
Determine total gross income, subtract all applicable deductions and adjustments, and calculate the NOL for the 2010 tax year. Include adjustments for dividends-received deductions, carrybacks, and carryforwards.
Step 2: Select the carryback period
Decide whether to carry the loss back two, three, four, or five years. The corporation must consider where the highest taxable income occurred to maximize the refund.
Step 3: Make the carryback election
Indicate the election at the top of Form 1139 and attach a statement referencing Revenue Procedure 2009-19. The election is valid only once per applicable tax year.
Step 4: Complete Form 1139 accurately
Recompute taxable income and total tax liability for each carryback year. Include both regular income tax and alternative minimum tax. Use the AMT worksheets when the AMT tax rates apply.
Step 5: Attach supporting documentation
Attach the following when applying:
- A copy of the corporation’s 2010 tax return (Form 1120)
- Schedules showing how the loss was calculated
- Computations for each carryback year with revised taxable income and tax liability
- Proof of any unused general business credit or claim of proper adjustment
- Form 8302 if requesting direct deposit of refunds exceeding one million dollars
Step 6: File Form 1139
Send the completed form to the IRS Service Center where the corporation typically files its return. It must be mailed separately and cannot be e-filed. The IRS generally issues the tax refund within 90 days of receiving a complete application.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
Corporations often make avoidable mistakes when completing Form 1139, which can result in delays, denials, or additional IRS correspondence. Understanding these errors helps ensure the refund claim is processed accurately and on time.
- Filing before submitting Form 1120: The IRS will reject Form 1139 if the corporate income tax return (Form 1120) has not yet been filed and recorded. Always submit Form 1120 first to establish eligibility.
- Missing the 12-month filing deadline: Form 1139 must be filed within 12 months after the end of the tax year in which the loss occurred. Late applications require the use of Form 1120X, which generally takes longer to process.
- Miscalculating the NOL: Errors in net operating loss (NOL) calculations often occur when corporations fail to adjust for deductions such as dividends received or domestic production activities. Verify all carryback and deduction limits before filing.
- Ignoring the 50% limitation: The five-year carryback rule is subject to a 50% limitation on taxable income. Failure to apply this cap can result in reduced or denied refunds.
- Omitting required schedules or attachments: Missing worksheets or supporting schedules often delay processing. Include all relevant computations, statements, and backup documentation.
Proper documentation, accurate NOL computations, and timely filing ensure Form 1139 is processed efficiently and help corporations avoid costly delays or rejections.
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 a corporation submits Form 1139, the IRS reviews the application and generally issues the tentative refund within 90 days from the filing date or the return’s due date, whichever is later. The refund is not final and may be audited later to confirm calculations for net operating losses, deductions, or alternative minimum tax adjustments. If errors or overstatements are found, the IRS can recover any excess refund and assess additional tax or interest. If the claim is denied, the corporation may file Form 1120X to formally amend its tax return and preserve its right to appeal.
FAQs
Who must file IRS Form 1139 (2010)?
Corporations use IRS Form 1139 (2010) to apply for a tentative refund when they experience a net operating loss or an unused general business credit. This corporation application allows a quick refund based on prior tax years.
How does the alternative minimum tax affect a tentative refund?
When filing Form 1139, corporations must recompute alternative minimum taxable income and related AMT liability. The 2010 tax law temporarily lifted the 90% limitation on NOL deductions, which reduced minimum tax exposure for businesses claiming extended carrybacks.
What deductions and adjustments apply when recalculating taxable income?
Corporations must include certain deductions, itemized deductions, capital gains, and net capital losses when determining taxable income. The IRS requires adjustments for gross income, wages, pension, and annuity income to ensure the correct total tax liability.
Can farming losses or NOLs be carried forward indefinitely?
Yes, certain farming losses and NOLs arising in qualifying tax years ending in 2010 could be carried back up to five years or carried forward indefinitely, depending on the election made under the 2010 tax law and applicable exceptions.
Does Form 1139 affect self-employment tax or social security benefits?
Form 1139 applies only to corporations and does not affect self-employment tax or social security benefits. However, adjustments to income, deductions, or tax liability may influence related taxes on salaries and other business income.
Where can taxpayers find additional information about Form 1139?
Taxpayers can visit the official IRS website for additional information, instructions, and examples. The IRS provides guidance on figures, rules, and thresholds for calculating net operating losses, carryforwards, and overpayment refunds under the CARES Act and other applicable laws.
