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The IRS released new and updated FAQs regarding the temporary procedures allowing taxpayers to file eligible Forms 1139 (refunds for corporations) and Forms 1045 (refunds for individuals, estates, and trusts) to claim refunds under the net operating loss (NOL) carryback and alternative minimum tax (AMT) credit acceleration provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The IRS previously released two sets of FAQs explaining these procedures (see Tax Alerts 2020-0990, 2020-1073).

FAQs updated to include Form 1040X and Form 1045

The IRS updated FAQs 8, 9, 13 and 14 to include non-corporate taxpayers by adding references to Form 1040X and Form 1045.

New FAQs

The IRS provided new guidance for taxpayers who need to file an amended return on Form 1120X or Form 1040X before filing Form 1139 or Form 1045. FAQ 15 requires taxpayers who must file a hard copy amended return via mail (versus e-filing) to also file the corresponding Form 1139 or 1045 in hard copy; these taxpayers may not use the temporary fax procedures. The Form 1139 or Form 1045 must be filed before the extended due date under Notice 2020-26, which granted a six-month extension to file a tentative refund claim for taxpayers with an NOL arising in a tax year that began during calendar year 2018 and ended on or before June 30, 2019 (see Tax Alert 2020-0991).

FAQ 16 clarifies that taxpayers e-filing Form 1120X can fax the corresponding Form 1139 and should note on the fax cover page the date the electronically submitted Form 1120-X was accepted. The IRS said it cannot process the Form 1139 until the amended amounts from the Form 1120X have been processed and reflected on the taxpayer's account. The timeframe for processing the Form 1120X and adjusting the amount depends on the particular taxpayer's circumstances, the IRS said.

In response to questions from taxpayers regarding processing times, the IRS stated that the statutory timeframe for processing Forms 1139 and 1045 is 90 days, and that it is "working to process these refunds as quickly as possible, with limited staffing, managing the volumes and adjusting to processing these refunds in a remote work environment."

Exempt organizations must use Form 990-T

The IRS clarified that exempt organizations may not use Forms 1139 or 1045 to submit a tentative refund claim for an NOL carryback or AMT credit associated with a previously-filed Form 990-T. Such organizations must instead paper-file an amended Form 990-T per the form instructions but may attach a Form 1139 or 1045 to the amended Form 990-T to show the computation of the refund claim.

Implications

As we have noted before, given the quicker processing times that are likely to be available to taxpayers seeking refunds using faxed Forms 1139 and 1045, it is critically important for taxpayers to carefully follow the guidance published by the IRS regarding its temporary fax procedures. Taxpayers that are not eligible to use these procedures must file refund claims via mail. While the IRS has begun to recall workers to process the mail that has accumulated at service centers over the last month or more, there will still be a significant delay in the processing of refund claims filed in paper form. Taxpayers should pay particular attention to the instructions regarding filing amended returns; Forms 1139 and 1045 containing numbers that do not match what is currently reflected on the taxpayer's IRS account cannot be processed. The new FAQs are designed to assist taxpayers with meeting this matching requirement within the extended deadlines for filing Forms 1139 and 1045.

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