What Is Form 1045: Application for Tentative Refund?
According to the instructions for Form 1045, the basis for the refund request must be for one of four reasons:
- The carryback of a net operating loss (NOL)
- The carryback of an unused general business credit
- The carryback of a net section 1256 contracts loss
- An overpayment of tax due to a claim of right adjustment under section 1341(b)(1)
The instructions for Form 1045 spell out what qualifies as a loss.
- As a result of the Tax Cuts and Jobs Act (TCJA), most taxpayers can now only carry net operating losses (NOLs) arising from tax years after 2017 to a later year.
- The net operating loss (NOL) carryback generally will not exceed $250,000 for single taxpayers, or $500,000 for married filing jointly returns.
- Taxpayers should be careful when carrying back net operating losses (NOLs) to a previous tax year, as it may create an alternative minimum tax (AMT) obligation.
Who Can File Form 1045: Application for Tentative Refund?
Individuals, estates, and trusts can file Form 1045: Application for Tentative Refund instead of using Form 1040-X for individuals or using Form 1041 for estates or trusts.
Form 1045 is used to file for a quick tax refund, while Forms 1040X and 1041 are not processed as quickly. Form 1045 is required to be processed by the IRS within 90 days, and can only be filed by the taxpayer or taxpaying entity within one year of the NOL occurring. In contrast, both Form 1040X, for individuals, or Form 1041 for estates and trusts, can be filed up to three years from the time the NOL occurs. However, the IRS will not process either Form 1040X or Form 1041 within 90 days and has up to six months to process either of these refunds.
Form 1045 can be disputed by the IRS or the taxpaying entity after the refund is processed, which is why it is labeled as a tentative refund. In contrast, the information and claims made on Forms 1040X and 1041 are assumed by all parties to be correct and final. A party that wants a fast refund but isn’t concerned about having the refund corrected later will file Form 1045, while a party that wants accuracy and can wait for the correct refund will file either Form 1040X (individuals) or Form 1041 (estate or trust).
Form 1045 is available on the IRS website.
Form 1045: Application for Tentative Refund is not attached to an income tax return, but filed separately or mailed in a separate envelope.
How to File Form 1045: Application for Tentative Refund
Taxpayers must file Form 1045 within one year after the end of the year in which the triggering incident—an NOL, unused credit, net section 1256 contracts loss, or claim of right adjustment—arose.
The first part of the form includes personal details including the name, address, and Social Security number of the filer. The next section includes questions about the nature of the carryback. The filer must then figure out the amount of the decrease in tax from the carryback for each year before the NOL or unused credit. The taxpayer will sign and date the bottom of the form, along with the tax preparer, if any.