The Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in 2020 provides tax benefits that help cushion businesses against economic downturn. The Internal Review Service (IRS), through Form 1139, provides tax refunds that blunt financial burden from carrybacks of net operating losses (NOLs) and other tax provisions in section 1341(b) 1. We delve into how corporations can leverage this form to obtain tax refunds.
What Is a Form 1139?
A form 1139 or corporation application for tentative refund form is an official document by the IRS that corporations fill to request a refund on taxes. The form leverages different tax acts, especially the recent CARES acts and employs the tax refunds primarily on NOL carrybacks. NOL is when the taxation of an entity exceeds the taxable income. The IRS released the form on October 1, 2018; however, updates have been. Obtain an up-to-date version of the document from the IRS or the U.S Department of Treasury websites.
Essential Elements of the Form 1139
Due to different tax brackets and obligations, organizations employ different types of 1139. However, at the minimum, a good form 1139 contains the following:
- · Official mail address including the unit number after the street number if present
- · Amount of the carryback. Line 1a is where you write the tentative refund based on the carryback of any NOL
- Net capital loss
- Unused general business credit
- Overpayment of the tax section
- Foreign taxes that reflect as a credit
- Consolidated tax refund section
- Computation of tax decrease
- Taxable income from previous tax returns
- Capital loss carryback
- NOL deduction
- Alternative minimum tax
- Refigured income tax
- Other credits
- Other taxes
- Base erosion minimum tax
A standard form 1139 contains the above essentials. How you fill and submit it determines whether you will receive a positive response after processing. Businesses are unique, so not every form will appear the same after filling.
How to Fill Form 1139
Form 1139 has a lot of sections that you need to fill duly. But you first need to understand your claims and whether you are eligible for tax refunds based on carrybacks of net operating losses. We try to simplify completing the document with the following steps:
Obtain original copies of tax returns dating to 5 years before the CARES act. The tax returns assist you in recalculating the tax returns that you can obtain a refund based on the carrybacks of NOLs. Additional documents you may need to first source are:
- First two pages of income tax returns
- Carryback forms for refigured items
- Separate forms 8302 for each carryback year.
- Reportable Transaction Disclosure Statement
Note: If you are filing form 1139 for refunds on net operating loss carryback grounds, indicate the carryback period.
Key in the details
Capture the primary data, such as the address and name of the corporation. That should take you 10 minutes at most. Using original tax returns, indicate the taxable income; however, do not file your corporation’s tax returns with the form. Proceed to state the net operating loss in the NOL section. Enter the recalculated return after the carryback column for the previous year.
In line 1c, state the unused general business credit, and in line 4, the foreign taxes taken as credit. Refigure the credit for the carryback year, albeit on form 3800 that you will attach to form 1139. Line 5 is where you indicated consolidated tax returns for a multifaceted organization. Line 11 through 28 shows the refigured tax returns based on the carrybacks.
In line 29, you will key in the overpayment tax to get a tentative refund based on overpayment. Enter the amount and attach a computation proof.
Generally, a form 1139 takes 10 hours to prepare and complete. However, the time significantly varies depending on your understanding of regulations and the corporation’s tax obligations. After you have enlisted the details, proofread the document and ensure no erroneous entries. Once done, save the form and fax the form or deliver via USPS. Read on to check the eligibility of delivering through temporary procedures.
Note: Always read the fine print of any tax document before signing and submitting it. Tax regulations are dynamic, have an attorney explain the legalese and IRS jargon in form 1139 before commencing the filling process.
As of 2020, there was no provision to e-file the form.
Faxing form 1139 is a temporary procedure you can leverage. Conversely, you can submit your claims through fax if you initially filed the form via tangible copy delivery. The faxing process is a temporary procedure subject to change.
Use form 1139 to apply for tentative tax refunds if you are eligible. The IRS imposed restrictions on the NOL clauses; therefore, contact your compliance attorney to get the latest updates. However, ensure you submit the form within 12 months of the year for the carryback or right adjustment claim.
The statutory period for processing applications is 90 days. However, since many IRS personnel work from home, the resolving process may take longer.
In some terms, corporations other than (S) corporations use form 1139 to request tentative tax refunds per the CARES act, while individuals use form 1045.
Tentative tax refunds are the government aids to blunt the economic hardship we are experiencing in the pandemic. Seek legal guidance when submitting your claims to better your chances of receiving the refunds.