IRS Releases Temporary Procedures on Claiming Quick Refunds of Credit for Prior Year Minimum Tax Liability and NOLs
By: Kyle P. Graham
On April 13, the IRS released guidance to provide temporary procedures to fax certain Forms 1139 and 1045 in order to claim quick refunds of credit for prior year minimum tax liability and net operating losses (NOLs). Note, there is a 100-page limit for faxing these forms. Only claims allowed under Section 2303 and Section 2305 of the CARES Act may use this procedure. This post updates our prior posting on tax relief at: https://www.mccarthylebit.com/2020/04/10/updated-irs-guidance-pandemic-related-tax-relief/.
The guidance issued by the IRS implements temporary procedures for digital transmission of Form 1139 and Form 1045. Only those claims specified below that are made on Form 1139 and Form 1045 are eligible refund claims under the IRS’s temporary procedures:
- Section 2303 requires a taxpayer with a net operating loss arising in a 2018, 2019, or 2020 taxable year to carry that loss back to each of the five preceding years unless the taxpayer elects to waive or reduce the carryback; and
- Section 2305 modifies the credit for prior-year minimum tax liability of corporations, including to accelerate the recovery of remaining minimum tax credits of a corporation for its 2019 taxable year from its 2021 taxable year and to permit a corporation to elect instead to recover 100% of any of its remaining minimum tax credits in its 2018 taxable year.
Starting on April 17, 2020 and until further notice, the IRS will accept eligible refund claims Form 1139 submitted via fax to 844-249-6236 and eligible refund claims Form 1045 submitted via fax to 844-249-6237. These fax numbers will not be operational before this date and the IRS encourages taxpayers to wait until April 17 to use the fax numbers, rather than mail the forms before this date. Below is a brief summation of frequently asked questions published by the IRS relating to these temporary procedures.
- Previously, these forms were required to be filed via hard copy through a delivery service. The temporary procedures now allow the IRS to accept faxed forms before IRS processing centers are reopened. Procedures to process claims remain the same; the only difference is to allow an additional method to file eligible refund claims.
- If a taxpayer previously mailed a hard copy of either of these forms after March 27, the taxpayer may now re-submit that same claim to the fax numbers above starting April 17.
- All claims under Form 1139 and Form 1045 will be processed in the order they are received by the IRS, including those received before the processing centers were closed.
- Claims faxed to the numbers above that are deemed ineligible refund claims will be processed after normal IRS operations resume.
- Taxpayers may disregard the instructions for Form 1139 and Form 1045 which prohibit taxpayers from using those forms to apply for refunds in which they have a section 965(a) inclusion. However, be aware that because the CARES Act provides that a taxpayer who has a carryback to a Section 965 year is deemed to have made a Section 965(n) election that limits the amount of the loss that can be carried back to each such year, an NOL can be carried back only to reduce income in excess of the amount of the net Section 965(a) inclusion. The IRS expects to issue additional instructions on filing requests for tentative refunds for taxpayers with outstanding Section 965(h) net tax liabilities.
- The IRS has not established a similar procedure for Form 4466 “Corporation Application for Quick Refund of Overpayment of Estimated Tax.” Form 4466 must still be filed in accordance with existing form instructions.
- This temporary faxing process is not meant to be permanent. This is meant as a short-term solution to assist taxpayers in receiving refunds provided under the CARES Act as quickly as possible.
Taxpayers that have questions regarding the above IRS guidance should consult their professional advisors to ensure compliance with these temporary procedures.
Kyle Graham is an attorney at the Cleveland, OH-based law firm, McCarthy, Lebit, Crystal & Liffman.
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