What the Form Is For

Form 1139 is the IRS fast-track form that allows corporations (excluding S corporations) to request a quick refund of previously paid taxes. Think of it as the express lane for corporate tax refunds—instead of waiting years for a standard amended return to process, the IRS commits to reviewing your Form 1139 application within 90 days.

Corporations use Form 1139 to apply for tentative refunds in four specific situations:

Net Operating Loss (NOL) Carryback

When your corporation loses money in 2017, you can "carry back" that loss to offset profits from previous years, potentially recovering taxes you already paid. For 2017, most NOLs could be carried back two years, though farming losses and insurance company losses (excluding life insurance companies) had special carryback periods.

Net Capital Loss Carryback

If your corporation sold capital assets at a loss, you can carry that capital loss back three years to offset previous capital gains, recovering the taxes paid on those earlier gains.

Unused General Business Credit Carryback

When tax credits exceed your current year's tax liability, you can carry unused credits back one year to reduce prior year taxes and claim a refund.

Claim of Right Adjustment

When you repay income that was taxed in a prior year, you may be entitled to a refund under Section 1341(b)(1).

The key advantage? Speed. While a standard amended return (Form 1120X) can take 6+ months to process, Form 1139 receives priority processing within 90 days of filing or the return's due date, whichever is later.

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When You'd Use It (Late/Amended Filing)

Strict 12-Month Deadline

Time is critical with Form 1139. You must file within 12 months of the end of the tax year in which the loss, unused credit, or claim of right adjustment occurred. For a calendar-year corporation with a 2017 loss, the deadline would be December 31, 2018. Miss this window, and you'll need to file a standard amended return (Form 1120X) instead—which means slower processing and different procedures.

File Your Original Return First

Here's a crucial catch: you cannot file Form 1139 before filing your original income tax return for the loss year. The IRS requires that your regular corporate return be filed by the time you submit Form 1139. This means if you're claiming a 2017 loss carryback, your 2017 Form 1120 must be filed (or simultaneously filed with) Form 1139.

Amended Returns: When You Must Use Form 1120X Instead

In 2017, certain situations absolutely require using Form 1120X rather than Form 1139, even if you're within the 12-month window:

• Carrying back to a year with a Section 965(a) inclusion (related to the transition tax on foreign earnings from the Tax Cuts and Jobs Act)
• Releasing prior year foreign tax credits due to an NOL or capital loss carryback
• Releasing prior year minimum tax credits
• Having a Section 965 inclusion in the NOL year itself

For these complex international and alternative minimum tax scenarios, Form 1120X provides the proper framework for adjustments that Form 1139 cannot accommodate.

The 3-Year Alternative

If you miss the 12-month Form 1139 deadline, all is not lost. You can still file Form 1120X within three years of the original return's due date (or filing date, if later) to claim your refund. The tradeoff is time—amended returns lack the 90-day processing guarantee.

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Key Rules for 2017

Understanding the 2017 Tax Landscape

The 2017 tax year sits at a critical juncture in tax law. It falls under pre-Tax Cuts and Jobs Act (TCJA) rules, which means different NOL treatment than later years. For 2017 losses:

Two-Year General Carryback

Most corporate NOLs from 2017 could be carried back two years (to 2015 and 2016). This differs significantly from losses in tax years ending after December 31, 2017, where the TCJA eliminated NOL carrybacks for most corporations.

20-Year Carryforward Limitation

Any 2017 NOL not absorbed in the carryback period could only be carried forward 20 years. This contrasts with post-2017 losses, which can be carried forward indefinitely.

No 80% Limitation

For 2017 NOLs, there was no restriction on how much taxable income the loss could offset in carryback years. You could reduce prior year taxable income to zero. The TCJA's 80% limitation only applies to losses arising in tax years beginning after December 31, 2017.

Special Computations Required

When calculating your 2017 NOL for Form 1139, several adjustments apply:

• No NOL deduction from other years can be included
• Dividends-received deductions are computed without the Section 246(b) aggregate limitation
• The domestic production activities deduction (Section 199) is generally disallowed in NOL computation
• Capital loss carrybacks cannot exceed capital gain net income in the carryback year

Consolidated Groups

If your corporation is part of a consolidated group, special rules apply. The group's common parent files Form 1139, and refunds go to the common parent—not individual group members. Qualified new members joining consolidated groups have specific timing rules.

No Section 965 Carrybacks

This is critical for 2017: if you're carrying back to a year with a Section 965(a) inclusion (the transition tax on previously untaxed foreign earnings from the TCJA), you cannot use Form 1139. You must file Form 1120X instead. Many corporations had Section 965 inclusions in 2017 and 2018 returns.

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Step-by-Step Filing Process (High Level)

Step 1: Confirm Eligibility (Before You Start)

Verify that: (a) your corporation is not an S corporation; (b) you're within 12 months of the loss year-end; (c) you're not carrying back to a Section 965 year; and (d) your 2017 return is filed or being filed simultaneously.

Step 2: Gather Required Documents

Assemble copies of: your 2017 corporate return's first two pages; all schedules creating the carryback (Schedule D for capital losses, Form 3800 for credits); any Form 8886 (Reportable Transaction Disclosure) attached to your return; and the original or amended returns for all carryback years you'll be adjusting.

Step 3: Complete the Form Header

Enter your corporation's basic information—name, address, EIN, and tax year of the loss or credit. Use the address where you currently file returns, including any third-party designations if you receive mail through an accountant or representative.

Step 4: Identify Your Carryback Type (Lines 1a-1d)

Check the appropriate box and enter the carryback amount: Line 1a for NOL carrybacks (farming losses or insurance company losses for 2017 forward); Line 1b for net capital losses; Line 1c for unused general business credits; or Line 1d for claim of right adjustments.

Step 5: Calculate Year-by-Year Impact (Lines 11-28)

This is the most complex section. For each carryback year, you'll create two columns—"before carryback" and "after carryback." Start with the earliest year. Enter original taxable income, apply the carryback, recalculate income tax, credits, and other taxes, and compute the overpayment. The form accommodates up to three carryback years with paired columns.

Step 6: Request Your Refund Method (Line 33)

Indicate whether you want the refund as a direct payment or applied to estimated taxes. For refunds of $1 million or more per carryback year, you must complete Form 8302 for electronic deposit.

Step 7: File at the Correct Service Center

Mail Form 1139 to the IRS service center where you file your regular corporate returns. Do not attach it to your corporate return—it must be filed separately. The IRS has different processing units for tentative refund applications.

Step 8: Track the 90-Day Clock

The IRS must process your application within 90 days of the later of: (a) when you file the complete Form 1139, or (b) the last day of the month containing your 2017 return's due date (including extensions). For a calendar-year corporation with an extension, this might be October 31, 2018.

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Common Mistakes and How to Avoid Them

Mistake #1: Filing Before the Original Return

Many corporations rush to file Form 1139 to start the 90-day clock, only to have it rejected because they haven't yet filed their 2017 Form 1120.
Solution: File both returns simultaneously or ensure Form 1120 is filed first. The IRS systems will check for this and reject premature applications.

Mistake #2: Missing the 12-Month Deadline

A December 31, 2017 year-end means a December 31, 2018 deadline—easily missed during year-end 2018 business pressures.
Solution: Calendar the deadline when you discover the loss. Set a reminder for 11 months after year-end to give yourself buffer time.

Mistake #3: Using Form 1139 for Section 965 Situations

The Tax Cuts and Jobs Act created transition tax complexities that Form 1139 cannot handle.
Solution: If your carryback years (2015-2016 for a 2017 loss) or your 2017 return itself involve Section 965 inclusions, consult a tax advisor and prepare to use Form 1120X instead.

Mistake #4: Incomplete Documentation

Applications missing required attachments—copies of returns, schedules, or computation worksheets—will be rejected or delayed.
Solution: Create a checklist from the Form 1139 instructions' "What to Attach" section. Include: first two pages of the 2017 return, all relevant schedules (Schedule D, Form 3800, etc.), refigured carryback year forms, and detailed calculations supporting your numbers.

Mistake #5: Arithmetic Errors in the Year-by-Year Columns

The paired-column format (before/after carryback) invites calculation mistakes, especially when refiguring credits and other taxes.
Solution: Use spreadsheet software to model the calculations before transferring to the form. Have a second person review all arithmetic. Remember that a math error can cause the entire application to be disallowed.

Mistake #6: Claiming Released Foreign Tax Credits on Form 1139

If your NOL or capital loss carryback reduces foreign-source income in prior years, released foreign tax credits cannot be processed through Form 1139.
Solution: Understand that Form 1139 handles direct refunds only. Released credits require Form 1120X with proper Form 1118 attachments.

Mistake #7: Not Designating a Representative

When the IRS has questions during the 90-day review, they need to contact someone quickly.
Solution: If your CPA or attorney prepared Form 1139, attach Form 2848 designating them as your representative for this matter.

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What Happens After You File

The 90-Day Processing Commitment

Unlike standard amended returns that can languish for 6-12 months, the IRS is legally required to act on Form 1139 within 90 days. This clock starts on the later of: (1) the date you file a complete application, or (2) the last day of the month containing your return's due date including extensions. For a calendar-year 2017 return with a valid extension to October 15, 2018, the clock wouldn't start until October 31, 2018, even if you filed Form 1139 earlier.

IRS Review Process

During the review period, IRS examiners verify: calculations are correct; carryback amounts match your 2017 return; carryback year figures match IRS records; and all required documentation is attached. They may contact you or your designated representative for clarification. Respond quickly—time counts against your 90 days.

Possible Outcomes

Approval

You receive a refund check or credit to your estimated tax account. The amount is typically paid with interest. However—and this is important—approval doesn't mean audit protection. The payment is "tentative." The IRS explicitly states that receiving the money doesn't mean they've accepted your application as correct. They can (and do) audit these carrybacks later.

Disallowance

If your application has material omissions or math errors that aren't corrected within 90 days, the IRS can disallow it entirely. You cannot sue to challenge this disallowance. Your only recourse is filing Form 1120X (the regular amended return route) within the standard 3-year limitations period.

Partial Approval

The IRS may approve part of your refund while disallowing other portions, especially if some carryback years are clean while others have issues.

Post-Refund Audit Risk

Even after you receive the money, the IRS can audit the carryback within the normal statute of limitations. If they later determine you overstated the loss or incorrectly calculated the carryback, you'll face:

• Assessment of the excess refund amount
• Interest charges from the refund date
• Potential penalties if the overstatement resulted from negligence, disregard of rules, substantial understatement, or overvaluation of property

Excessive Allowances

Any amount refunded that later proves excessive is treated as if it resulted from a math or clerical error on your return. The IRS can assess it through their summary assessment procedures—faster and with fewer taxpayer protections than normal deficiency procedures.

Your Next Move If Dissatisfied

If your Form 1139 is disallowed or only partially approved, immediately file Form 1120X to preserve your rights. While you can't sue over Form 1139 disallowance, you can sue over Form 1120X if: (a) the IRS doesn't process it within 6 months and you want your refund faster, or (b) they disallow Form 1120X and you disagree (you have 2 years from the disallowance date to file suit).

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FAQs

1. Can I e-file Form 1139?

No. As of the 2017 tax year, Form 1139 cannot be electronically filed. You must mail a paper copy to the appropriate IRS service center where your corporation files its returns. During the COVID-19 pandemic (2020), the IRS temporarily accepted faxed submissions, but this was an emergency measure. Check current IRS guidance if you need to file for 2017 losses now, as special procedures may have expired.

2. What if I made an error on my Form 1139 after filing?

If you discover an error after filing but before the IRS processes your application, immediately contact the IRS service center where you filed and your designated representative. If it's a minor arithmetic error, they may request clarification. For substantial errors, you may need to withdraw the Form 1139 and file a corrected version, assuming you're still within the 12-month deadline. After the 90-day period ends, file Form 1120X to correct any mistakes.

3. How does Form 1139 interact with alternative minimum tax (AMT)?

For 2017 carryback years (2015-2016), you must refigure the alternative minimum tax for each year affected by the carryback. Attach Form 4626 for those years showing the recalculated AMT. The NOL deduction for AMT purposes follows different rules than regular tax. Note that corporate AMT was repealed for tax years after 2017, but it still applies to your 2015-2016 carryback years.

4. Can I use Form 1139 if I'm carrying back to a consolidated return year?

Yes, but special rules apply. If you're carrying back a loss from a separate return year to a year when you were part of a consolidated group, the common parent of the carryback year must receive the refund—not your corporation directly. Additionally, if you became a "qualified new member" of a consolidated group during 2017, creating a short year, specific reporting requirements apply on line 5 of Form 1139.

5. What happens if I have both an NOL carryback and a capital loss carryback?

You can claim both on a single Form 1139, but order matters. Apply carrybacks chronologically to the earliest year first. Be careful: a net capital loss can only be carried back to the extent it doesn't increase or produce an NOL in the carryback year. This interdependency requires careful calculation. Consider consulting a tax professional to properly sequence the carrybacks and maximize your refund.

6. Is there a minimum refund amount required to file Form 1139?

No. The IRS doesn't set a minimum threshold. However, given the complexity of preparing Form 1139 and the risk of audit, many tax advisors suggest the refund should be substantial enough to justify professional preparation costs and management attention. For refunds under $10,000, some corporations find the cost-benefit analysis favors waiting to file Form 1120X instead.

7. Can I waive the NOL carryback and just carry the loss forward?

Yes, and this is important for 2017. If your corporation has a 2017 farming loss or insurance company loss (the only types eligible for carryback from 2017 forward under post-TCJA rules), you can make an irrevocable election to waive the carryback period. Make this election by checking the appropriate box on Form 1120, Schedule K, line 11, and filing your return timely. Once made, the election cannot be changed. If you filed your 2017 return without making the election, you can still make it on an amended return filed within 6 months of the original due date (excluding extensions), with a statement marked "Filed pursuant to section 301.9100-2."

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Disclaimer: This guide provides general information about Form 1139 for the 2017 tax year based on IRS publications. Tax situations vary greatly by corporation. For specific advice about your situation, consult a qualified tax professional or CPA familiar with corporate taxation and carryback procedures.