Form 1045
Candlefocus EditorForm 1045 can be used to carry back NOLs under specific rules mandated by the recently passed Tax Cuts and Jobs Act (TCJA). As a result of the law change, taxpayers can only carry back net operating losses (NOLs) arising from tax years after 2017, and the carryback must not exceed $250,000 for single taxpayers, or $500,000 for married filing jointly returns.
Taxpayers must select from the two NOL rules described in Internal Revenue Code (IRC) section 172 to determine their eligibility for a NOL carryback to a prior year. Covered losses, as defined in IRC section 172(d)(2)(A)(i)(I), can be carried back for two years, whereas noncovered losses can be carried back for five years.
The IRS Form 1045, Application for Tentative Refund, must be filed within one year from the due date of the return for the year the net operating loss arose, not including any extensions. If the taxpayer is unable to adjust the overpayment resulting from the carryback to the prior tax year, then the refund can be treated as a tentative refund claimed on Form 1045 and be applied against their estimated tax payments for the or any subsequent tax year.
Lastly, taxpayers should be aware that claiming a NOL carryback may also create an alternative minimum tax (AMT) obligation in the prior year, and they will be liable for any AMT balance due. Therefore, it is important that taxpayers weigh the benefits of a net operating losses (NOL) carryback against the potential AMT liability.
In conclusion, Form 1045 enables taxpayers to request an adjustment to the tax amount due in the current tax year by applying the net operating losses of a prior tax year. It is important for taxpayers to be aware of the rules for preparing Form 1045, and to weigh the potential AMT liabilities when carrying back a net operating loss.