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Amending a Return for Net Operating Loss Carrybacks and Carryforwards

How do you amend a return for NOL carrybacks and carryforwards?

Amending a return for net operating loss (NOL) carrybacks and carryforwards means filing the appropriate IRS forms to apply an NOL to earlier tax years (carryback) or adjust later years (carryforward), so you can claim a refund or reduce taxable income in years when the NOL is applied.
Tax accountant and client in a modern office reviewing amended tax documents and a timeline graphic showing carryback and carryforward arrows

Overview

A net operating loss (NOL) occurs when a taxpayer’s allowable deductions exceed taxable income for the year. Amending returns to apply an NOL — either to prior years (carryback) or to future years (carryforward) — can generate refunds or reduce future tax liabilities. The mechanics, deadlines, and forms differ by entity type (individual, trust, estate, corporation), and recent law changes (TCJA and CARES Act) affect eligibility. For authoritative guidance, see IRS Publication 536 and the IRS pages for Form 1045 and NOLs (IRS.gov).

This article explains which forms to use, the timing rules, how to calculate carrybacks/forwards, common pitfalls, and practical tips for preparing an amended return. It includes internal links to related FinHelp articles on NOLs and corporate tentative refunds.

Current federal rules (as of 2025)

  • Post-TCJA baseline (losses arising after 2017): NOLs generally are not eligible for carryback (with narrow exceptions) and may be carried forward indefinitely. Use of NOLs to offset taxable income in a carryforward year is limited to 80% of taxable income for NOLs arising in tax years after 2017. (IRS, Publication 536)
  • CARES Act temporary change (2018–2020 NOLs): The CARES Act allowed five‑year carrybacks for NOLs arising in 2018–2020 and temporarily lifted the 80% limitation for those tax years. Those temporary rules have mostly expired and do not apply to NOLs arising after 2020. (IRS guidance summaries)

Because rules changed across years, you must identify the tax year the NOL arose to know what carryback/carryforward options apply.

Who files what: key forms and when to use them

  • Form 1045 (Application for Tentative Refund): Used by individuals, estates and trusts to request a quick tentative refund for an NOL carryback. File Form 1045 within 12 months after the end of the NOL year to seek an expedited refund. (IRS, About Form 1045)
  • Form 1040-X (Amended U.S. Individual Income Tax Return): Use to amend individual federal returns to claim a refund or correct the prior-year tax return when not using Form 1045. A refund claim generally must be filed within the statute of limitations (see next section).
  • Form 1139 (Corporation Application for Tentative Refund): Corporations use Form 1139 to request a tentative refund for NOL carrybacks. It accelerates refunds for corporations that qualify. See FinHelp’s glossary page on Form 1139 for details and process steps.
  • Form 1120-X (Amended U.S. Corporation Income Tax Return): Corporations file 1120-X to amend corporate returns that are being adjusted for carrybacks or other corrections.

Internal FinHelp links:

Step-by-step process to amend for an NOL

  1. Confirm the year the NOL arose and calculate the NOL amount. Use IRS Publication 536 for the NOL calculation rules (carryover adjustments, nonbusiness items, capital loss interactions).
  2. Determine eligibility for carryback. If the NOL year falls under special carryback windows (for example, certain 2018–2020 CARES Act rules applied), document the applicable statute. Otherwise assume post‑2017 NOLs are generally carryforward only unless a specific exception applies.
  3. Decide whether to use a tentative refund application (Form 1045 for individuals/estates/trusts; Form 1139 for corporations) or to file amended returns (Form 1040-X or Form 1120-X) for the prior years you want to adjust. Tentative refund forms speed processing but require timely filing.
  4. Prepare supporting schedules: recompute taxable income for each carryback year, refigure credits and tax items affected by the NOL, and prepare any state return adjustments as needed.
  5. File the tentative refund application within the 12‑month window (if applicable) or file amended returns. If you file Form 1045/1139 and the IRS accepts the tentative refund, the IRS will issue a refund and later issue an adjustment for the NOL carryback on Form 2372 or other notice.
  6. Track the IRS response and be prepared to file formal amended returns if the IRS denies the tentative refund or if additional adjustments are required.

Timing and statutes of limitation

  • Form 1045 must be filed within 12 months after the end of the NOL tax year to request a tentative refund.
  • If you do not file Form 1045 (or miss the 12‑month window), you can still claim a refund by filing an amended return for the carryback year (Form 1040-X or Form 1120-X) but you must observe the general refund statute of limitations: generally three years from the date you filed the original return or two years from the date you paid the tax, whichever is later. If that window has closed, you cannot collect a refund for that year and should focus on carrying the NOL forward. (IRS general refund rules; see FinHelp’s article When an Amended Return Is Too Late for more details.)

Example calculations

Example A — Individual with a 2022 NOL of $60,000 (post‑TCJA baseline):

  • If the NOL arose in 2022 and no CARES Act carryback applies, you cannot carry back; you carry forward indefinitely and apply NOLs in future years subject to the 80% taxable income limitation.

Example B — Small corporation with a 2019 NOL of $40,000 (CARES Act window):

  • If the corporation elected to carry 2019 NOLs back up to five years (CARES Act), it could amend prior returns (or file Form 1139) to claim refunds for earlier profitable years. The company should prepare amended 2014–2018 returns or use Form 1139 to speed processing.

These examples are simplified. Each case requires recomputing taxable income, credits, AMT adjustments (if available), and interaction with other limitations.

State tax considerations

State NOL rules vary widely. Some states conform to federal NOL rules; others do not, or they have their own carryback/carryforward periods and limits. Always check the state tax authority’s guidance before assuming a federal NOL amendment will produce a state refund. FinHelp includes state-focused guidance in related articles.

Common mistakes and red flags

  • Assuming every NOL can be carried back: post‑2017 NOLs are usually carryforward only unless a specific exception exists.
  • Missing the Form 1045 12‑month tentative refund window and then missing the statute of limitations for amended returns.
  • Forgetting to adjust credits, AMT, or other items when recomputing prior-year returns.
  • Overlooking state tax return amendments.
  • Poor documentation: lacking contemporaneous support for deductions that created the NOL.

These mistakes increase audit risk and delay refunds.

Recordkeeping and audit readiness

Keep the following for at least the period covered by amended returns and the NOL carryforward years:

  • Workpapers showing NOL computation and supporting invoices, receipts, payroll records, and depreciation schedules.
  • Copies of filed Forms 1045/1139, Forms 1040-X/1120-X, and any IRS notices.
  • Documentation showing elections (if any) and board minutes for corporate decisions.

Good records speed responses to IRS inquiries and support your position in case of audit.

Practical tips from practice

  • Recompute both the carryback and carryforward scenarios before deciding. In some years a refund from a carryback is better; in others holding the NOL for a higher‑tax future year is preferable.
  • Consider cash flow. A tentative refund via Form 1045/1139 can be a fast way to get cash if eligible.
  • Coordinate state filings early. Some states require amended returns even when no refund is due federally.
  • If you are a small business owner, review the interaction between NOLs and the excess business loss rules or other loss limitations that apply to noncorporate taxpayers.

When to consult a professional

Because NOL rules change by tax year and interact with many other tax provisions (credits, AMT adjustments, loss limitations), consult a CPA or tax attorney when NOLs exceed routine levels, when state conformity is uncertain, or when corporate elections or consolidated return issues are involved.

Resources

Professional disclaimer: This article is educational only and does not constitute tax advice. Rules change and taxpayer circumstances vary. Consult a qualified tax professional for advice tailored to your situation.

Author credentials: I am a CPA and CFP® with 15+ years advising businesses and individuals on tax planning and NOL strategy. In practice, timely filing and careful documentation are the things that most reliably speed refunds and reduce audit exposure.

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