Adjustment(s) Amending Tax returns

[fellynbal]

Greetings,

When Amending Tax returns, how do I know if any previous year(s) have any bearing on the proceeding year(s)?  Example:  If I Amend 2021,2022,2023 & 2024 tax years, do I have to adjust the Amounts on the previous year(s) to make the following year(s) calculation(s) come out correctly?  

[Cindy4]

It's a good idea to amend prior years returns in chronological order.  Things like Net Operating Losses, Capital Loss Carryovers, certain tax credits, and depreciation could all impact the following years tax returns.  As an example:  If you have an unused capital loss from 2021, it would carry over to 2022 to either offset capital gains in that year, or if none, $3,000 of it could be used to reduce your taxable income in 2022.

[fellynbal]

Thank you.

What happens if by chance I may Amend my tax returns, but if I submit them to the IRS without doing the proper adjustments, Will the IRS do the adjustments for me, do they normally catch those errors if any may apply?

[Cindy4]

This is very situational and not often the case.  The IRS issue various notices depending on the what information is missing or a mis-match with what is showing in their system.  This article may help you.  However, some carry over information is not reported directly to the IRS and tracked only within your own records or worksheets produced within TurboTax year over year.  

Hope this helps!

Cindy

[fellynbal]

Let's say if I add an extra $3,000 to the 2021 Tax return while Amending it, will the Turbo Tax software make the adjustment(s) if any to reflect on the 2022 Tax year from Amending 2021 year?  

Also, how does it work,  I used to have a Landlord that even if I was late with my rent, I do not recall him ever charging me any late fees, but in the Lease or and however it was, it was mentioned that if you don't pay by a certain date or and however it was informed me of, about late fee(s), however it was.  Does that fall under CANCELLED DEBT in the IRS' eyes, or is Cancelled Debt only if, someone ACTUALLY BILLS you or and LOANS you a certain amount of money, property or and if any otherwise of debt, and if you don't pay any or all of it back to the debtor and the debtor tells you that you don't have to pay them all or any of the debt, then that is Cancelled Debt?  Of course there are exceptions to this depending on the situation(s), such as Gifts and other subjects.

[Loretta P]

If you use the TurboTax Desktop product to complete the amended return for the oldest year 2021 first and then progress forward to amend the following years it should pick up the changes from the prior year amend.  In the TurboTax Online product it would not pick up the corrected amounts automatically and you would have to make the corrections as part of amending the following years.

Cancelled debt is when one of your creditors canceled a debt you owe, meaning the company writes it off and you no longer have to pay it back.  For example the bank cancels your credit card, stops collection attempts on the balance owed and writes it off the banks books.  That is considered cancelled debt.  When the creditor writes it off their books, they will normally issue a 1099-C for the amount of the cancelled debt which you will need to report as income on your return.  Cancelled debt is considered income by the IRS.  

Cancelled Debt Exceptions 

• Debts you no longer have to repay because of a gift or a bequest made in a will. For example, suppose you borrow money from a friend and sign a promissory note. If your friend passes away and relieves you of your obligation to repay the loan in his will, the debt cancellation isn’t taxable.
• The cancellation of student loan debts resulting from your employment with a government agency or with an educational institution. And if your mortgage balance is reduced under a Home Affordable Modification Program, you don’t have to report it on your tax return.

Helpful links:

Guide to Debt Cancellation and Your Taxes 

Debt Cancellation and Your Taxes Explained - TurboTax Tax Tip Video 

[fellynbal]

so, is it best to use the Turbo Tax Desktop to other years also, such as 2022 and 2023 even though those years give me a choice to use Online or Desktop?  I did originally file these years using the Online filing software.

[Loretta P]

It really is personal choice for the later years.  If there were not many changes, it might be better to do the later years online.  For the oldest years you are not able to e-file the amended return so the desktop version is best for those.