AMENDING CARRYOVER LOSS ON EARLIER RETURN

[Owl5]

My brokerage incorrectly reported my cost basis of a bond that matured in 2020. The correct cost basis wasn’t available to the brokerage because I bought the bond before brokerages were required to keep cost basis records (so my cost basis is "non-covered"). I now want to amend my federal 2020 return in order to show the correct cost basis, which will then increase my carryover capital loss.

To amend my 2020 return I have to override TT’s cost basis amount. When I do this, TT correctly increases the carryover loss shown on the 2020 return.

Question #1:  Now, do I also need to amend my federal 2021 return simply in order to force TT, when preparing my 2022 return, to take into account my increased carryover loss?

When I amend my 2020 return, I have to override TT’s incorrect cost basis amount, which TT then identifies as an error. TT will also identify an override of my carryover loss as an error if I amend my 2021 return.

Question #2: If I also need to amend my 2021 return to get my capital loss to carry over to my 2022 return, will I then be prevented from filing my federal 2022 return electronically -- and maybe, from then on in for all future tax returns, also be prevented from filing electronically?  I believe that federal returns on which TT identifies an error can’t be filed electronically.

Thanks for answers to these two questions!

[GeorgeM777]

Question No. 1 - Yes, in order to get the amounts to carryover, you will need to amend your 2021 return.  Amending your 2021 return to reflect the carryover loss may impact other items on your 2021 return.

Question No. 2 - No, amending 2021 so as to carryover your loss amount to 2022 should not prevent you from e-filing.  Before e-filing you will need to clear all errors.  

When preparing your 2022 return, try entering "capital loss carryover" (don't use the quotes)  in the search tool.  Then use the jump-to link to the screen reflecting your 2021 information.  You should be able to edit your carryover loss amounts on that screen.  

@Owl5

[Owl5]

Many thanks GeorgeM777 for your helpful reply!

You make clear that in order to e-file, I'll need to clear all errors. You've said that when I prepare my 2022 return, the jump-to link that goes to my 2021 information will then permit me to edit my carryover loss on that screen.

When I do this, I'll need to override the carryover loss show on that screen, isn't that correct? And if I must use an override, won't TT then identify this override as an error, and the block my ability to e-file?

Thanks for this clarification, and again many thanks for taking the time to answer my questions!

[GeorgeM777]

Yes, change the carryover loss to an amount you believe is the correct amount.  No, TurboTax should not identify your change to the carryover loss and mark it as an error that needs to be fixed.  The edit button on the relevant screen allows taxpayers to make adjustments.   It is not uncommon to find taxpayers making adjustments to carryover losses when prior year returns need to be amended.  

@Owl5

[Owl5]

Many thanks for clarifying this, very helpful and much appreciated!