In 2021, I had short term realized losses of around 1,300$ from the stock market. That year, I worked a student job in which no federal tax was withheld as it was part time and did not exceed the required amount for federal withholding. This year, 2022, I am working a job in which I will pay federal income tax exceeding the 1,300$ realized loss from 2021. Is there any way to carry this loss to 2022 so that I can deduct it from my 2022 federal income tax. Please let me know. I have struggled to decipher articles about it online. If yes, what forms should I be filing.
Thanks
I would recommend filing your 2021 return to report the sale and establish the CLCO. even though all details of the trades (sales price, cost, gain/loss) may have been reported to the IRS, it has no way of knowing if you had security transactions that were not reported to it. so if you don't file 2021, you may have the CLCO disallowed when you file 2022
if the trading is all you have you can probably file for free (even free if there are other items to report) so there is no reason not to file
you can e-file for free using a provider approved by the IRS. Turbotax is no longer a freefile provider.
@qualifiedtaxuser100 - I agree with the advise to file 2021.
However, note that the short term loss is netted again YOUR INCOME, not against the TAX.
If you end up in the 10% tax bracket, that $1300 is going to reduce your taxable income by $1300 and reduce the tax owed by $`130.
By filing the 2021 return the program you use will compute the loss carry forward (if any) and that is the amount you will enter on the 2022 return.
Did you file a 2021 return? If not you probably should as answered above. The loss may carryover to next year. If you have a negative AGI or negative taxable income it will show up on 1040 BUT it won't reduce the carryover to the next year. Nothing to do with any withholding taken out or not. A loss reduces the income that you are taxed on.
Q. Can I carry this loss to 2022 so that I can deduct it from my 2022 federal income tax.
A. Simple answer: Yes.
There is a place in TurboTax to enter your capital loss carry forward. TT places it on line 7 of form 1040, as a negative number. Your entire loss carries forward, if your income was all earned income (e.g. W-2 wages) and was not enough to have to file a federal tax return*. Although it's helpful to prepare a 2021 return (whether you file it or not) to calculate the carry forward amount, it is not required.
*Basically, you are allowed to use your standard or itemized deductions to reduce your taxable income before having to use your capital loss.
Technically, if your standard (or itemized) deduction is greater than your AGI, without the capital loss, then all your capital loss is carried forward.