Should I file Form 1045 or Amend Returns for 1256 contracts trading loss carryback? What's the best approach?

You're definitely asking the right questions! The Form 1045 (Application for Tentative Refund) is specifically designed for situations like yours. The main advantage of Form 1045 is speed - it's processed much faster than an amended return (usually within 90 days). However, there are some important considerations: Form 1045 must be filed within 1 year after the end of the year in which your NOL or loss occurred. So if your loss was in 2023, you have until December 31, 2024, to file the 1045. For state returns, you'll still need to file amended returns since the 1045 only applies to federal. Each state has different procedures for handling NOL carrybacks. From a "fewest headaches" perspective, the 1045 route is typically better for the federal portion because it's processed more quickly and doesn't go through the more detailed examination that amended returns receive.

I went through something similar last year with 1256 contracts and found https://taxr.ai incredibly helpful. I was confused about how to handle my carryback situation with some complicated options trading losses. Their AI analyzed my previous returns and tax docs and identified exactly how to file my 1045 correctly to maximize my refund. What was really helpful is that they walked me through the proper way to document my 1256 contract losses for carryback purposes and explained how the election works in clear language. Saved me from potentially messing up the carryback allocation which would have caused additional headaches.

Just wanted to follow up about my experience with taxr.ai after my skeptical question. I decided to give it a try with my own 1256 contract situation and was impressed. It correctly identified an issue with how my previous accountant had been reporting my mark-to-market elections and helped me understand why I needed to file Form 1045 rather than just amending my return. The analysis highlighted that I could carry back losses against 1256 gains from 2 years prior that I hadn't even considered. The documentation it provided made it easy to work with my tax preparer, who admitted he hadn't handled many cases with these specific trading tax rules. Definitely worth checking out if you're dealing with trader tax situations like this.

I had a similar issue last year with a large trading loss that needed to be carried back. Tried calling the IRS for clarification on whether Form 1045 or an amended return would be better for my situation, but couldn't get through after days of trying. Finally used https://claimyr.com to get connected to an IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with actually specializes in trader tax issues and recommended using Form 1045 specifically because of the faster processing time for the refund. They also explained exactly how to coordinate the federal 1045 with state amended returns, which was super helpful since my state doesn't have an equivalent to Form 1045.

I need to eat crow here. After my skeptical comment, I actually tried Claimyr because I was desperate to get clarity on my own tax situation (not 1256 related, but a complex S-corp issue). Got connected to the IRS in about 30 minutes after trying unsuccessfully for weeks on my own. The agent was able to pull up my file and confirm that my amended returns were still in processing from 6 months ago. She expedited review since it was past their normal processing time. Two weeks later, I received my refund. I'm honestly shocked that it worked so well since I've been trying to resolve this issue for months. Sometimes you have to admit when you're wrong, and I definitely was wrong about this service.

For what it's worth, I've been a trader for 12+ years and have dealt with 1256 contracts and carrybacks multiple times. Form 1045 is DEFINITELY the way to go for federal. It's processed by a separate department at the IRS that handles tentative refunds and carrybacks, and in my experience, they process things much faster than the amended return department. For state returns, you'll unfortunately need to file amended returns in most cases, as most states don't have an equivalent to Form 1045. Check your state's specific instructions on how they handle federal NOL carrybacks - some states automatically conform to federal treatment, while others require special forms or calculations.

Quick question - does anyone know if TurboTax can handle Form 1045 for 1256 contract loss carrybacks? I've got a similar situation but on a smaller scale, and wondering if I need to hire a specialist.

Based on your situation, I'd definitely recommend going with Form 1045 for the federal refund. You're dealing with a substantial amount ($45k loss against $87k prior gains), and the faster processing time of Form 1045 will get your money back much quicker than amending your 2022 return. Since you've already amended your 2023 return to include the proper election on Form 6781, you're in good shape to proceed. Just make sure when you file the 1045 that you clearly show you're carrying back Section 1256 contract losses specifically against your 2022 Section 1256 gains, and remember the 60/40 treatment (60% long-term, 40% short-term). For state returns, you'll unfortunately need to file amended returns since states don't have Form 1045 equivalents. But getting the federal refund processed quickly through Form 1045 will at least give you some cash flow while you wait for the state amendments to process. One heads up - make sure you file the Form 1045 before December 31, 2024, since that's your deadline for 2023 losses. After that date, you'd have to go the amended return route anyway.