A carryback claim is a request to apply a current-year tax loss or unused credit against income you already reported in an earlier year, generating a refund of tax you already paid. For most filers in 2026, the option is narrower than it used to be: net operating losses (NOLs) arising after 2020 generally cannot be carried back at all and must be carried forward instead. A handful of losses and credits still qualify, and knowing which ones — and how quickly you have to move — is what determines whether you actually see a refund.
What Still Qualifies for a Carryback
The Tax Cuts and Jobs Act ended the general NOL carryback for losses arising after December 31, 2017. The CARES Act briefly reopened it, allowing a five-year carryback for losses arising in 2018, 2019, and 2020.1Internal Revenue Service. Frequently Asked Questions About Carrybacks of NOLs for Taxpayers Who Have Had Section 965 Inclusions That window is closed. For any NOL that arose after 2020, the default rule is carry it forward, not back.
A few categories survived the change:
Farming losses. The portion of an NOL attributable to a farming business can still be carried back two years. The farming loss is the lesser of your NOL for the year or the NOL you would have if only farming income and deductions were counted.2Office of the Law Revision Counsel. 26 USC 172 – Net Operating Loss Deduction For an operator who has a bad year, this is real cash relief on returns already filed.
Corporate net capital losses. When a corporation’s capital losses exceed its capital gains, it can carry the net capital loss back to each of the three preceding tax years.3Office of the Law Revision Counsel. 26 USC 1212 – Capital Loss Carrybacks and Carryovers Individuals do not get this treatment; they can only offset up to $3,000 of ordinary income per year with net capital losses and must carry any remainder forward.
Unused general business credits. Both individuals and corporations can carry back an unused general business credit through the tentative refund process.4Internal Revenue Service. About Form 1045, Application for Tentative Refund5Internal Revenue Service. About Form 1139, Corporation Application for Tentative Refund
Net section 1256 contracts losses. Individual taxpayers with losses on certain futures and options contracts can seek a carryback refund on those losses through Form 1045.4Internal Revenue Service. About Form 1045, Application for Tentative Refund
Choosing Not to Carry the Loss Back
Even when a carryback is available, you can elect to skip it and carry the loss forward only. This is sometimes the smarter choice: if your prior-year income was taxed at a low rate and you expect higher-rate years ahead, the loss offsets more tax used later. The election must be made by the due date, including extensions, of the return for the loss year, and once made it is irrevocable for that year. The same deadline governs a farmer’s election to waive the two-year farming carryback.
How to File for a Quick Refund
The fastest route to a carryback refund is the tentative refund application. Individuals, estates, and trusts use Form 1045. Corporations use Form 1139. The IRS is required to process a complete application within 90 days, measured from the later of the date you filed it or the last day of the month that includes the due date (with extensions) of your return for the loss year.6Internal Revenue Service. Instructions for Form 1139 – Corporation Application for Tentative Refund
Form 1045 can now be filed electronically using Form 8453-TR as the declaration, or on paper by mailing it to the IRS service center listed in your income tax return instructions.7Internal Revenue Service. Instructions for Form 1045 Do not attach either form to your current-year return; they are separate filings.
The application has to show the arithmetic. Attach a schedule computing the NOL (or other qualifying loss) in the loss year, then work through each carryback year to show how applying the loss reduces the previously reported taxable income and tax. The refund you request is the difference between what was originally owed and what would have been owed with the loss applied. Incomplete applications are the most common cause of delay: if the IRS cannot trace the loss cleanly through each recomputed year, it will kick the claim back or ask for more information, and the 90-day clock can burn while you respond.
A tentative refund is exactly that — tentative. The IRS pays quickly but keeps the right to examine the claim afterward. If it later concludes the refund was too high, you owe the excess back with interest.
The 12-Month Deadline
Form 1045 and Form 1139 both carry a strict filing deadline: within 12 months after the end of the tax year in which the loss arose.7Internal Revenue Service. Instructions for Form 1045 A calendar-year taxpayer with a 2025 loss has until December 31, 2026. Miss it, and the quick refund option is gone.
Amended Returns as the Slower Fallback
If the 12-month window has closed, you can still pursue the carryback refund by filing an amended return — Form 1040-X for individuals or Form 1120-X for corporations. The cost is time: amended returns routinely take several months to process, compared with the 90-day tentative refund window.
The outer deadline for claiming a refund at all is the later of three years from the date you filed the original return or two years from the date you paid the tax.8Internal Revenue Service. Time You Can Claim a Credit or Refund Certain claims get longer windows — bad debt deductions and worthless security losses have a seven-year period — and if you signed a written agreement extending the assessment period with the IRS, your refund claim deadline extends six months past the agreed date.
Penalties If You Claim Too Much
A carryback claim for more than the law allows triggers a 20% penalty on the excessive portion — the amount by which the refund claimed exceeds what was actually allowable.9Office of the Law Revision Counsel. 26 USC 6676 – Erroneous Claim for Refund or Credit The penalty covers income and employment tax refund claims. Reasonable cause — a good-faith error in a genuinely uncertain area — will get the penalty waived, but not knowing that the carryback rules changed several years ago generally will not. The NOL computation is where mistakes compound, and it is the part of the process where getting a second set of eyes on the numbers tends to be worth the cost.