The CARES Act added provisions allowing taxpayers to carry net operating losses from 2018 and 2019 back five years, potentially giving affected taxpayers access to much needed cash by filing a claim for refund.  And the IRS has issued guidance allowing the Forms 1045 and 1139 to be used to claim the refunds under the tentative refund procedures.

But there is a problem—those forms cannot be filed electronically, and the IRS is not processing paper filed forms at this time, as all Service Centers have now been closed for an indefinite period of time.  In order to address this issue, the IRS has released on its website temporary procedures for filing Forms 1045 and 1139 by fax.[1]

The guidance notes that only claims for refund under either §2303 or §2305 of the CARES Act will be processed under this procedure.  The page describes those sections as follows:

• 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 percent of any of its remaining minimum tax credits in its 2018 taxable year.

The program, which begins on April 17, is described as follows:

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. Before then, these fax numbers will not be operational. We encourage taxpayers to wait until this procedure is available rather than mail their Forms 1139 and 1045 since mail processing is being impacted by the emergency.

The IRS is also imposing a 100-page limit on the claims submitted:

A maximum of 100 pages can be initially faxed to either of the fax numbers listed above. If additional documentation is required to be attached or deemed to be necessary, taxpayers will be notified during the processing of the Form 1139 or Form 1045.

The IRS notes the following changes from the normal hard copy procedures:

Previously, these forms could be filed only via hard copy delivered through the USPS or by a private delivery service. There are well-established procedures for processing the hard copy forms in order to provide quick tentative refunds to taxpayers. A temporary procedure to accept these forms via fax permits us to make the relief in the CARES Act available to taxpayers before IRS processing centers are able to reopen. The procedures to process claims will remain the same – the only difference is to allow an additional method to file eligible refund claims.

The FAQ also deals with cases where taxpayers may have already mailed in a paper Form 1045 or 1139:

Yes, if you previously mailed a hard copy of either of these forms that is an eligible refund claim (because it contains changes permitted by the AMT and NOL provisions of the CARES Act identified above) after March 27, 2020, you can now submit that same claim to the fax numbers stated above starting on April 17.

If a taxpayer submits an ineligible claim (one not authorized under the CARES Act provisions mentioned), it will be held and processed once normal operations resume.

The IRS also notes that the instructions for Forms 1045 and 1139 have outdated information regarding §965 years in the carryback period, instructions that will be corrected to agree with the law:

Yes, you may disregard the instructions for Form 1139 and Form 1045 which prohibit taxpayers from using these forms to apply for refunds for 965 years. The instructions to these forms will be updated to reflect this change. However, please be aware that because the CARES Act added section 172(b)(1)(D)(iv) to provide 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, so that these requests and liabilities can be identified, routed, and tracked appropriately, and so that payment schedules can be adjusted to avoid unintentional or erroneous acceleration of deferred section 965(h) installment payments, delays in refunds, or other processing complications.

The IRS will not be establishing a similar procedure for filing Form 4466 “Corporation Application for Quick Refund of Overpayment of Estimated Tax,” instead requiring taxpayers to follow the existing form instructions.

And the IRS ends by making it clear that the fax system is not something that they plan to make a permanent way to file these claims:

No, accepting faxed versions of these forms that are normally delivered through the USPS or by a private delivery service is meant as a short-term measure to assist taxpayers in receiving refunds provided under the CARES Act as quickly as possible.

[1] “Temporary procedures to fax certain Forms 1139 and 1045 due to COVID-19,” IRS Website, April 13, 2020, https://www.irs.gov/newsroom/temporary-procedures-to-fax-certain-forms-1139-and-1045-due-to-covid-19 , retrieved April 13, 2020