IRS Form 1139: Corporation Application for Tentative Refund
Learn how corporations use Form 1139 to apply a net operating loss to a prior tax year, resulting in an expedited, tentative refund from the IRS.
IRS Form 1139, Corporation Application for Tentative Refund, provides a streamlined process for corporations to get an expedited tax refund. It allows a company to receive cash more quickly than by filing an amended return. The form is used to claim a refund based on the carryback of a net operating loss (NOL), a net capital loss, or unused general business credits. Carrying back an NOL to a prior, profitable year reduces that year’s tax liability and generates a refund.
The form can also be used for an overpayment of tax from a claim of right adjustment under Internal Revenue Code Section 1341. This applies when a corporation must repay income that was reported in a prior year because it was later established they did not have an unrestricted right to it.
Determining Eligibility to File
Only corporations, excluding S corporations, are eligible to file Form 1139. The form is used when one of the previously mentioned losses or credits can be carried back to offset taxable income or tax liability in previous years, resulting in an overpayment.
For NOLs arising in tax years beginning after 2020, carryback rules are limited to farming losses and losses from certain insurance companies. These specific losses can be carried back to prior tax years to reduce taxable income. This reduction leads to a recalculation of the tax for that year and a refund.
Individuals, estates, and trusts seeking a similar tentative refund for carrybacks must use Form 1045, Application for Tentative Refund. Corporations that are ineligible for the expedited process of Form 1139 or miss the filing deadline must instead file Form 1120X, Amended U.S. Corporation Income Tax Return, to claim their refund. Filing Form 1120X is a slower process for receiving a refund.
Information and Calculations for Form 1139
To complete Form 1139, a corporation must provide basic identifying details, such as its name, Employer Identification Number (EIN), and address. You must also specify the tax year of the loss or credit and the prior tax year or years to which it will be carried back.
The main preparation involves calculating the loss or credit for the current year and then recomputing the tax liability for the carryback year. A corporation must determine the loss amount from its income tax return (Form 1120). Then, it must adjust the taxable income of the prior carryback year by deducting the loss and recalculate the total tax for that year.
The difference between the original tax paid and the recomputed tax liability is the overpayment amount claimed as a tentative refund. This calculation must be shown in detail on Form 1139, which requires a side-by-side comparison of the tax liability before and after applying the loss. To report the original figures accurately, the corporation will need its income tax return for the carryback year.
The Filing and Refund Process
Form 1139 has a strict filing deadline. It must be filed within 12 months after the end of the tax year in which the loss or credit arose. For example, a calendar-year corporation with a loss for the 2024 tax year must file Form 1139 by December 31, 2025. The corporation’s income tax return for the loss year must also be filed on or before the date Form 1139 is filed.
The completed Form 1139 must be mailed to the IRS service center where the corporation files its regular income tax return. The mailing addresses for these service centers are provided in the instructions for Form 1139. Sending the form to the correct location is important to avoid processing delays.
After the IRS receives a completed Form 1139, it has a 90-day period to review the application and issue a refund. This expedited timeline is the main advantage of using the form. The refund is considered “tentative,” meaning it is subject to a more thorough examination by the IRS later.
Because the refund is tentative, the IRS can later audit the loss-year return and the carryback application. If an examination determines the refund was excessive, the corporation must repay the excess amount with potential interest and penalties. This means all calculations and information on Form 1139 must be accurate and well-documented.