What Form 1139 Is For

Form 1139 is a special IRS form that corporations (except S corporations) use to quickly get money back from the government when they've overpaid taxes in previous years. Think of it as a "fast-track refund" form—it's designed to return your money faster than the standard refund process.

This form applies to four main situations. First, when your corporation had a net operating loss (NOL)—essentially when your business expenses exceeded your income for the year and you want to "carry back" that loss to offset profits from earlier years. Second, when you had a net capital loss from selling business assets at a loss. Third, when you have unused general business credits that weren't fully used in the year you earned them. Finally, when you need to make a claim of right adjustment under IRC Section 1341(b)(1)—a technical situation where you had to repay income you previously reported and paid taxes on.

The beauty of Form 1139 is speed. While regular amended returns can take six months or longer to process, the IRS is legally required to process Form 1139 within 90 days. This makes it invaluable for corporations that need cash flow relief quickly. IRS.gov

When You’d Use Form 1139 (Including Late/Amended Filing)

Primary Timing Rule: You must file Form 1139 within 12 months of the end of the tax year in which the loss or unused credit occurred. For example, if your corporation had a net operating loss for the year ending December 31, 2011, you must file Form 1139 by December 31, 2012. This deadline is firm—miss it and you'll need to use the slower Form 1120X (Amended Corporation Income Tax Return) process instead.

Critical Requirement: Your corporation must file its income tax return for the loss year before or at the same time as you file Form 1139. You cannot skip ahead and file Form 1139 before filing the original return for that year.

When It's Too Late: If you miss the 12-month window, you're not out of luck—you just lose the speed advantage. You'll need to file Form 1120X instead, which allows you up to three years from when you filed the original return (or two years from when you paid the tax, whichever is later) to claim your refund. However, Form 1120X can take considerably longer to process—potentially 6+ months—and doesn't have the 90-day processing guarantee.

Special Situations: If you need to carry back a foreign tax credit that was released due to an NOL, or if you're making certain other complex adjustments, you must use Form 1120X instead of Form 1139, even if you're within the 12-month window. IRS Instructions for Form 1139

Key Rules or Details for 2011

Carryback Period: In 2011, the standard carryback period for most NOLs was 2 years back. This meant if your corporation had a loss in 2011, you could carry it back to 2009 and 2010 to get refunds. Any loss not absorbed by those two years could then be carried forward for up to 20 years to offset future profits. (Note: Different rules applied for certain specialized losses like farming losses or losses of small life insurance companies.)

Carryforward Duration: If your 2011 loss wasn't fully used by carrying it back to 2009 and 2010, you could carry the remaining loss forward indefinitely to future tax years to reduce those years' tax bills.

Election to Waive Carryback: Corporations could elect to waive (skip) the carryback period entirely and only carry losses forward. This might make sense if you expected higher tax rates in future years or if the earlier years had little or no taxable income. Once made, this election was irrevocable, so it required careful consideration.

Capital Loss Carryback: For capital losses in 2011, the carryback period was 3 years—one year longer than ordinary NOLs. Capital losses could only be carried forward for 5 years, not 20.

Unused Credits: General business credits could be carried back 1 year and forward 20 years under 2011 rules.

Processing Guarantee: The IRS had to process your Form 1139 within 90 days from the later of: (1) when you filed a complete application, or (2) the due date (including extensions) for filing your corporation's tax return for the loss year. This was a binding legal requirement, though in practice the IRS sometimes struggled to meet this deadline during high-volume periods. IRS Instructions for Form 1139

Step-by-Step (High Level)

Step 1: Gather Your Documents

Before starting, collect: your corporation's original tax return for the loss year (2011), copies of any schedules showing the loss or credit (like Schedule D for capital losses or Form 3800 for business credits), and the original returns for the carryback years (2009 and 2010).

Step 2: Calculate the Loss or Credit

Determine exactly how much NOL, capital loss, or unused credit you have available to carry back. This involves completing the relevant schedules from your 2011 return and ensuring all computations are accurate.

Step 3: Complete the Header Information

Fill in your corporation's name, address, employer identification number (EIN), and the tax year you're applying for. Indicate which type of carryback you're claiming (NOL, capital loss, credit, or claim of right adjustment).

Step 4: Allocate the Carryback

In Lines 11-28, you'll show the "before and after" effect of the carryback. For each prior year (2009, then 2010), you'll enter the original taxable income and tax, then recalculate those figures with the carryback applied. The form uses paired columns—one showing the original figures and one showing the refigured amounts.

Step 5: Calculate the Refund

The difference between the tax you originally paid and the recalculated (lower) tax becomes your refund. Line 30 shows the total decrease in tax for all carryback years combined.

Step 6: Attach Required Documents

Include copies of: the first two pages of your 2011 corporate return, all schedules that show the loss or credit, any election statements, and the refigured schedules for the carryback years showing your new calculations.

Step 7: File at the Correct Location

Mail Form 1139 to the IRS Service Center where your corporation normally files its income tax return. Do not include it with your regular tax return—it must be filed separately. IRS Instructions for Form 1139

Common Mistakes and How to Avoid Them

Mistake #1: Filing Before the Original Return

Many corporations try to file Form 1139 before submitting their tax return for the loss year, thinking they can expedite the process. The IRS will reject your application if the original return hasn't been filed first. Solution: Always ensure your 2011 corporate return is filed before or simultaneously with Form 1139.

Mistake #2: Missing the 12-Month Deadline

Missing the 12-month filing window is surprisingly common, especially for corporations that discover losses during later audits or reviews. Solution: Mark your calendar immediately when you identify a loss. Calculate the deadline (12 months from the end of your tax year) and set reminders several weeks before it expires.

Mistake #3: Incomplete Documentation

Filing without all required attachments causes processing delays or outright rejection. Missing items often include: copies of the original return pages, the schedules showing the loss calculation, or the refigured computations for carryback years. Solution: Create a checklist from the "What to Attach" section of the instructions and verify each item before mailing.

Mistake #4: Math Errors in Carryback Calculations

Lines 11-28 require precise recalculations of prior-year taxes. Errors in these computations can cause the IRS to disallow the entire application, with no right to challenge the disallowance in court. Solution: Have a second person review all calculations, or better yet, use tax software designed for carryback computations.

Mistake #5: Confusing Material Omissions

The IRS will disallow Form 1139 for "material omissions"—significant missing information that prevents them from verifying your claim. Common examples include failing to show how you calculated the loss or omitting required election statements. Solution: Follow the instructions line-by-line and include explanatory statements wherever calculations aren't obvious.

Mistake #6: Using Form 1139 for the Wrong Situation

Some carrybacks cannot use Form 1139. For example, if you're carrying back a released foreign tax credit, or carrying items to a "section 965 year" (related to foreign earnings), you must use Form 1120X instead. Solution: Review the "Filing Form 1120X or Other Amended Return" section of the instructions carefully to determine if your situation requires the amended return instead.

Mistake #7: Assuming "Tentative" Means "Final"

The refund from Form 1139 is called "tentative" for a reason—the IRS can and does audit these claims later. If they find overstatements, they'll assess penalties and interest on the excess refund. Solution: Be conservative in your calculations and keep thorough documentation supporting every number on the form. IRS Instructions for Form 1139

What Happens After You File

Initial Processing (0-90 Days)

Once the IRS receives your Form 1139, they begin processing it. By law, they must complete this within 90 days of the later of: when you filed the complete application, or the due date for your 2011 corporate return. During this period, they verify that you included all required information and that your basic calculations appear reasonable.

Contact for Clarification

If the IRS needs additional information, they'll contact you or your designated representative (if you attached Form 2848, Power of Attorney). Respond promptly—failure to provide requested information within the 90-day window can result in disallowance of the entire application.

Refund Issued

If approved, the IRS will send your refund check or direct deposit. Refunds of $1 million or more for a single carryback year require electronic deposit (you must attach Form 8302 to request this).

No Interest on Quick Payments

If the IRS issues your refund within 45 days of filing Form 1139, they won't pay you interest on the refund amount. Interest only accrues if they take longer than 45 days, calculated from the due date of the loss-year return.

Important: "Tentative" Means Under Review

Receiving your refund doesn't mean the IRS agrees with your application—it's called a "tentative refund" because they can review it later. The IRS can audit your claim for up to three years (or longer in cases of fraud or substantial understatement). If they later determine you weren't entitled to part or all of the refund, they'll bill you for the excess amount plus penalties and interest.

If Your Application Is Disallowed

The IRS can disallow Form 1139 if it contains material omissions or mathematical errors that aren't corrected within the 90-day period. Here's the catch: you cannot sue in court to challenge this disallowance. Your only recourse is to file a regular refund claim using Form 1120X, which then follows the normal amended return procedures with full appeal rights.

Protective Measures

The IRS may assess penalties if your deductions were due to negligent calculations, disregard of rules, or substantial understatement of income tax. Common penalties include the 20% accuracy-related penalty or even fraud penalties in egregious cases. This is why conservative, well-documented claims are essential.

Extended Statute of Limitations

Here's something many corporations don't realize: filing Form 1139 can reopen the statute of limitations for the carryback years. When you carry a loss back to 2009 or 2010, the IRS can reassess those years—not just for the carryback, but potentially for any issue they find during their review. This means years you thought were closed can be audited again. IRS Instructions for Form 1139

FAQs

Q1: Can I e-file Form 1139 for 2011?

No. For 2011, Form 1139 had to be filed by mail. The form must be sent to the IRS Service Center where your corporation files its regular income tax return. Always check the instructions for the correct mailing address, as these can change.

Q2: What's the real difference between Form 1139 and Form 1120X?

Speed and flexibility are the key differences. Form 1139 gets your money back within 90 days but offers limited scope—it only works for NOL carrybacks, capital loss carrybacks, certain credit carrybacks, and claim of right adjustments. Form 1120X (the amended return) takes 6+ months to process but can be used for any type of correction to your return. Additionally, if the IRS denies Form 1120X, you can sue in court; if they deny Form 1139, you cannot. Finally, Form 1139 refunds are "tentative" and subject to later adjustment, while Form 1120X refunds go through more thorough review before being issued.

Q3: Can I file Form 1139 if I already filed Form 1120X for the same issue?

Generally no—if you've already filed Form 1120X, you should let that process complete rather than filing a duplicate Form 1139. However, if you're still within the 12-month deadline and haven't yet filed an amended return, Form 1139 is usually the better choice due to faster processing.

Q4: What if my corporation had multiple losses—can I carry back to multiple years?

Yes! The form includes columns for up to three carryback years. For a 2011 NOL under the 2-year carryback rule, you'd carry to 2009 first (the earliest year), then any remaining loss to 2010. You apply the loss to the earliest year first, and whatever isn't absorbed moves forward sequentially.

Q5: Does filing Form 1139 trigger an audit?

Filing Form 1139 doesn't automatically trigger an audit, but it does increase scrutiny. The IRS examines these applications to verify the calculations and may review the underlying return more carefully. More importantly, filing a carryback reopens the statute of limitations for the carryback years, giving the IRS fresh opportunity to examine those returns for any issues—not just the carryback itself.

Q6: What happens if I discover an error after filing Form 1139?

If you discover an error before the IRS processes your application (within the 90-day window), you can file a corrected Form 1139. If the error is discovered after they've issued your refund, you may need to file Form 1120X to correct the carryback years. The approach depends on whether the error increases or decreases your refund entitlement.

Q7: Can I amend Form 1139 if the IRS changes my original 2011 return?

Yes. If an IRS audit increases your 2011 loss (creating a larger NOL than originally claimed), you can file a new or amended Form 1139 to carry back the additional loss, assuming you're still within the 12-month deadline from the end of the tax year. If you're beyond that deadline, use Form 1120X instead.

Sources: All information in this guide comes directly from official IRS sources:

• About Form 1139, Corporation Application for Tentative Refund - IRS.gov
• Instructions for Form 1139 (Rev. November 2021) - IRS.gov

Disclaimer: This guide provides general information about Form 1139 as it applied to 2011 tax years. Tax situations vary widely, and rules change over time. For your specific situation, consult a qualified tax professional or CPA before filing.