What Is IRS Form 1045?

IRS Form 1045 Explained in Less than 4 Minutes

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IRS Form 1045 is a tax form that some individuals, estates, or trusts use to quickly receive a tax refund related to a previous tax filing rather than receiving the refund by filing an amended tax return. This tax form is often used to receive a tax refund due to a business loss.

Learn more about IRS Form 1045 and how it works.

Definition and Examples of IRS Form 1045

IRS Form 1045 is an application for a tentative refund that individuals, estates, or trusts can file with the Internal Revenue Service (IRS), often when they have a business loss. This loss may be able to be applied to a previous tax year using what’s known as a carryback (i.e., carrying back the loss).

For instance, IRS Form 1045 can be used due to one of the following circumstances:

  • Having a net operating loss (NOL) that gets carried back to a previous tax year
  • Having an unused general business credit that gets carried back to a previous tax year
  • Having a net section 1256 contracts loss (such as a loss from a non-equity option) that gets carried back to a previous tax year
  • Realizing an overpayment of tax after making a claim of right adjustment that falls under section 1341(b)(1) of the tax code

How Does IRS Form 1045 Work?

If one of the above situations occurs, then an individual, estate, or trust might decide to file IRS Form 1045 so they can quickly get a tax refund. When this happens, the IRS generally processes the application within 90 days and will tentatively pay the refund. However, the IRS might still determine later that the application is inaccurate and that a refund should not have been issued. The taxpayer may have to pay penalties and interest.

In contrast to IRS Form 1045, taxpayers could file amended tax returns that account for the same scenarios. However, this approach could involve more paperwork and time, with the IRS taking around 16 weeks to process amended tax returns once received.

For taxpayers to receive a refund, they must first complete IRS Form 1045, “Application for Tentative Refund.” This application gets sent separately from a regular income tax return, either on the same date or after the income tax return. IRS Form 1045 can be sent up to a year following the year the NOL took place. So, if a taxpayer had an NOL in 2020, and they want to receive a refund for that, they could file IRS Form 1045 up until the end of 2021.

IRS Form 1045 has two main application pages as well as three additional pages used as a worksheet for calculating NOLs. You would fill out this application with information such as your name, Social Security number, and details about how a carryback (whether for an NOL or other reason) affects your income, deductions, credits, etc.—both before and after the carryback.

What Does IRS Form 1045 Mean for Individuals?

Due to the complexity of IRS Form 1045, you may want to speak with a tax professional to determine the best course of action for your circumstances. It’s possible that by filing Form 1045, for example, you would become liable for the alternative minimum tax for a previous tax year. That still might be worth it for some people, but it’s important to understand all the tax implications you may face.

You also may want to weigh whether it makes more sense to file IRS Form 1045 or file amended tax returns instead. But, in general, if you’re eligible for a tax refund due to one of the aforementioned reasons, Form 1045 is often a quick way to receive that refund.

If you’re considering filing IRS Form 1045, you keep in mind that recent tax law changes have affected rules around NOLs.

Under the Tax Cut and Jobs Act of 2017, NOLs could no longer be carried back for the previous two tax years, which is often where IRS Form 1045 would come in handy. However, under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020, the law was changed again, allowing taxpayers to carry back NOLs that occurred in 2018, 2019, and 2020 for five years. It appears, however, that in 2021 and beyond, other than farming losses, taxpayers will not be able to carry back NOLs, unless further changes are made.

Key Takeaways

  • IRS Form 1045 is used to apply for a quick tax refund, often related to a business loss that can be applied to previous years.
  • Using IRS Form 1045 is often a faster way to receive a refund than amending previous tax returns.
  • Recent tax law changes have affected how net operating losses and IRS Form 1045 can be used.