An individual, estate, or trust files Form 1045 to apply for a quick tax refund resulting from:
- The carryback of an NOL.
- The carryback of an unused general business credit.
- The carryback of a net section 1256 contracts loss. Corporations, partnerships,
estates, and trusts are not eligible to make this election.
- An overpayment of tax due to a claim of right adjustment under section 1341(b)(1).
The Cares Act of 2017 changed NOL carry-back rules for tax years 2018, 2019, and 2020 for five years. Generally, when there is an NOL at the end of the year, the taxpayer is required to carry back the total NOL five years without electing the waiver. The carryback period is NOT optional. However, a taxpayer may elect to waive the carryback period for all losses, or may elect to waive only Section 965. Any remaining loss after the NOL carryback may be carried forward for up to 20 years after the NOL year. You can't deduct any part of the NOL after the carryforward period.
Note: The special rules in Section 172 allowing an NOL carryback have expired effective with the 2020 tax year. Generally, you can only carry NOLs arising in tax years ending after 2020 forward to a later tax year. In addition, the TCJA limits the amount of loss that can be claimed in future years. Refer to Publication 536 for more information. An exception applies to certain farming losses, which may be carried back 2 years. For more information please refer to Publication 225.
In order to calculate the refund for a NOL carryback, tax preparers can either use Form 1045, Application for Tentative Refund or Form 1040X, Amended US Individual Income Tax Return. When using Form 1045, only one form needs to be prepared and includes up to 5 previous years of NOL carryback. If Form 1040X is used, a separate form must be prepared for each year the NOL is being carried back.
From the Main Menu of the Tax Return (Form 1040) select:
- Miscellaneous Forms
- Net Operating Loss Worksheet/Form 1045
- Form 1045 - Application for Tentative Refund
- Enter the number of years you wish to carry back the NOL
- Select the year you want to apply the NOL to first and complete the worksheet for that year.
If you wish to forego the carryback period, select IRC Sec 172(b)(c) Election to Forego the Carryback Period.
Note: This is a guide on completing Form 1045 in the TaxSlayer Pro program. This is not intended as tax advice.