What if you didn't document tax loss carryforward every year ?

Forum|Forum|7 years ago
May 31, 2019
34 replies
175 views

Friend had a large LT capital loss in 2006. Used some of the loss in 2007. Never used or needed the remaining loss since then.

Now he will have a capital gain this year - and wants to use 2006 loss remaining. Reading Schedule D instructions, appears the loss can be carried forward indefinitely.

QUESTION: He made no documentation of the "available carry forward" on 2008 through 2014 tax returns (because wasn't needed).

Is this a problem ? I'm not sure if there was something he should have done. The Schedule D instructions have a "Capital Loss Carryover Worksheet" - but this says "Keep for your records". Hopefully just the old return and supporting documentation is sufficient.

I think he used Turbotax, but in 2008 did not "import info from previous year". But the old lost is there and fully documented. Thanks !

TurboTax Home & Biz Windows

Best answer by rjs

Part of the carried over loss is used to offset ordinary income (not capital gains) each year. That's why Critter had trouble understanding your statement that your friend "never used or needed the remaining loss." "Is this a problem?" Yes. "Something he should have done" is carry over the loss each year and show it on his tax return. It's not "fully documented" if he didn't do that.

He cannot just take the loss that remained in 2007 and use that amount on his 2015 tax return. He has to recalculate each year's tax return from 2008 through 2014 with the loss carryover to determine how much is still remaining after 2014. The capital loss carryover from 2014 is what he can use on his 2015 tax return.

He should file amended returns for 2012, 2013, and 2014 if there is still a carryover in those years. He may get additional refunds because the loss carryover will reduce his taxable income. His tax might have been lower in 2008 through 2011 if he had properly carried over the loss, but it's too late to get refunds for years earlier than 2012 now.

Critter

Level 15

What do you mean by "needed the remaining loss since then" ... was he not required to file a return for any of those years?

Critter

Level 15

Hal has a good answer here ... you will need to at least compute the loss carryover each year even if you don't file a return:
<a href="https://ttlc.intuit.com/questions/2566411-do-i-have-to-use-a-capital-loss-carryforward-even-if-i-have-no-taxable-income" rel="nofollow" target="_blank">https://ttlc.intuit.com/questions/2566411-do-i-have-to-use-a-capital-loss-carryforward-even-if-i-have-no-taxable-income</a>

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davejunkmail123Author

Level 2

He only had $15k /year of SS income in those years. I think he was required to file a return. He just didn't use any of capital loss carry forward.

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SmOkEy12

Level 2

$14420 in capital loss was deducted correctly but not subtracted correctly on schedule d

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SmOkEy12

Level 2

how do i correct incorrect carry over on schedule d capital gain subtractions for 2018 2019 and 2020

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SweetieJean

Alumni - Champ

If Social Security was his only income, he did not need to file a return.

rjs

Answer

Level 15

Part of the carried over loss is used to offset ordinary income (not capital gains) each year. That's why Critter had trouble understanding your statement that your friend "never used or needed the remaining loss." "Is this a problem?" Yes. "Something he should have done" is carry over the loss each year and show it on his tax return. It's not "fully documented" if he didn't do that.

He cannot just take the loss that remained in 2007 and use that amount on his 2015 tax return. He has to recalculate each year's tax return from 2008 through 2014 with the loss carryover to determine how much is still remaining after 2014. The capital loss carryover from 2014 is what he can use on his 2015 tax return.

He should file amended returns for 2012, 2013, and 2014 if there is still a carryover in those years. He may get additional refunds because the loss carryover will reduce his taxable income. His tax might have been lower in 2008 through 2011 if he had properly carried over the loss, but it's too late to get refunds for years earlier than 2012 now.

VolvoGirl

Level 15

Maybe he can still carryover the full amount? Does this apply if you have zero AGI (well he would if he took the -3,000 each year)? If you have a negative AGI or negative taxable income read Pub 550 page 69 on Figuring your Carryover. So even though it shows it on 1040 line 13 it doesn't reduce the carryover to the next year.
<a href="http://www.irs.gov/pub/irs-pdf/p550.pdf" rel="nofollow" target="_blank">http://www.irs.gov/pub/irs-pdf/p550.pdf</a>

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davejunkmail123Author

Level 2

Thanks for comments. So if the original loss was $100k, he should have carried forward $3k/year against ordinary income for years 2008 - 2014 (7 years). Four of those years, 2008-2011 are too late to amend, so he loses $3k of losses for those years. For years 2012-2014, he should amend those returns, claim the $3k carryforward against ordinary income.

So I am hoping he can use $79k ($100k - $21k discussed above) past unused losses against a gain in 2015 ?

Thanks so much !