IRS Form 1138 – IRS Forms, Instructions, Pubs 2026 – In the complex world of corporate taxation, managing cash flow during periods of financial loss is crucial. IRS Form 1138, officially titled “Extension of Time for Payment of Taxes By a Corporation Expecting a Net Operating Loss Carryback,” provides a vital lifeline for corporations anticipating a net operating loss (NOL) that can be carried back to offset taxes from a prior year. This form allows eligible businesses to defer tax payments, helping maintain liquidity while awaiting the benefits of an NOL carryback. Whether you’re a tax professional, business owner, or financial advisor, understanding Form 1138 is essential for navigating IRS regulations effectively.
In this comprehensive guide, we’ll break down what IRS Form 1138 is, who can use it, how to complete it, filing requirements, and key considerations under current tax laws as of 2026. We’ll also explore recent legislative changes impacting NOL carrybacks, ensuring you have the most up-to-date insights for SEO-optimized tax planning.
What Is IRS Form 1138 and Its Purpose?
IRS Form 1138 is a specialized tax form designed for corporations that expect to incur a net operating loss in their current tax year. The primary purpose is to request an extension of time to pay taxes owed for the immediately preceding tax year, based on the anticipated overpayment resulting from carrying back the NOL. This includes extending payments for any tax deficiencies, but the deferred amount cannot exceed the expected refund from the carryback.
Key benefits include:
- Improved Cash Flow Management: By postponing tax payments, corporations can allocate resources elsewhere during challenging financial periods.
- Alignment with NOL Rules: It ties directly into Section 172 of the Internal Revenue Code, which governs NOLs and their carryback provisions.
- Temporary Relief: The extension applies only to taxes required to be paid after the form is filed, not to previously due amounts.
However, interest will accrue on the deferred taxes at the underpayment rate under Section 6621 from the original due date. The IRS may terminate the extension if the provided information is found to be erroneous or if tax collection appears jeopardized.
Who Should File IRS Form 1138? Eligibility Criteria?
Not every corporation qualifies for this extension. Eligibility hinges on expecting an NOL that can be carried back under current IRS rules. Here’s a breakdown:
- Primary Users: Corporations (including S corporations in certain contexts, though typically C corporations) anticipating an NOL in the current year that offsets taxes from the prior year.
- NOL Carryback Availability: Under the Tax Cuts and Jobs Act (TCJA) of 2017 (P.L. 115-97), NOL carrybacks were generally eliminated for losses arising after December 31, 2017. Exceptions include:
- Farming losses (2-year carryback).
- Losses from nonlife insurance companies (2-year carryback).
- Temporary Changes from CARES Act: The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (P.L. 116-136) temporarily allowed a 5-year carryback for NOLs from tax years 2018, 2019, and 2020. For tax years after 2020, the TCJA restrictions apply unless you’re in an excepted category.
- Ineligibility Factors: You cannot file if all taxes for the prior year have already been paid or were required to be paid before submitting the form. Also, revised forms can be filed if the expected NOL changes based on new information.
If your corporation fits these criteria, Form 1138 can be a strategic tool for tax deferral.
How to Fill Out IRS Form 1138: Step-by-Step Guide?
Completing Form 1138 requires careful attention to detail. The form is relatively straightforward but demands accurate projections and supporting documentation. Download the latest version from the IRS website: IRS Form 1138 PDF.
Header Information
- Enter the corporation’s name, Employer Identification Number (EIN), and full address (including foreign addresses with city, province/state, country, and postal code).
Key Lines and Instructions
| Line | Description | Tips |
|---|---|---|
| 1 | Ending date of the tax year for the expected NOL. | Use MM/DD/YYYY format; this is the current year’s end date. |
| 2 | Amount of expected NOL. | Base this on factual evidence like financial statements or operational changes. Consider limitations under Sections 382 and 384. |
| 3 | Reduction in previously determined tax due to the NOL carryback. | Attach a schedule showing calculations; reference Section 1314(a). |
| 4 | Ending date of the immediately preceding tax year. | This is the year to which the NOL will be carried back. |
| 5 | Reasons for the expected NOL. | Provide detailed facts, such as canceled contracts or market shifts. |
| 6a | Total tax from the prior year’s return, plus deficiencies, interest, or penalties. | Include all assessed amounts. |
| 6b | Amounts already paid or required to be paid. | Subtract refunds, credits, or abatements. |
| 6c | Deferred tax amount (6a minus 6b, not exceeding Line 3). | This is the extension amount. |
- Signature: An authorized officer must sign under penalties of perjury, certifying the information’s accuracy.
- Attachments: Include schedules for Line 3 calculations and any supporting evidence for the NOL expectation.
Retain a copy for your records. If circumstances change, file a revised Form 1138 to adjust the extension.
When and Where to File IRS Form 1138?
Timing is critical for Form 1138.
- Filing Window: Submit after the start of the NOL tax year but before the due date for paying the prior year’s taxes (typically with your income tax return or Form 7004 extension).
- Duration: The extension lasts until the due date of the NOL year’s return (including extensions). Further extensions may be requested via Form 1139 for tentative refunds.
- Where to File: Mail to the IRS service center where you file your corporate income tax return. Electronic filing is not available for this form.
For corporations under audit or with pending deficiencies, coordinate with your IRS contact to ensure proper processing.
Important Considerations and Recent Updates
As of 2026, NOL rules remain influenced by the TCJA, limiting carrybacks to specific industries. Always consult IRS Publication 536 (Net Operating Losses for Individuals, Estates, and Trusts) or Publication 542 (Corporations) for detailed guidance. If your NOL qualifies for carryback, Form 1138 can prevent penalties while you file Form 1139 or an amended return (Form 1120X) later.
Common pitfalls:
- Overestimating the NOL, leading to IRS termination of the extension.
- Failing to account for interest accrual.
- Ignoring post-TCJA limitations, which could render the form inapplicable.
For personalized advice, consult a certified tax professional. Staying informed on IRS updates ensures compliance and optimizes your corporation’s tax strategy.
By leveraging IRS Form 1138 strategically, corporations can better manage tax obligations amid net operating losses. For the latest form and instructions, visit the official IRS website.