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akf3
Level 2

Capital Loss Carryforward did not properly flow from 2018 to 2019 return and not record, can we use in 2020?

College-age daughter had a capital loss carryforward which she carryforward in 2016, 2017 and 2018.  (we filed returns, just to carry forward the same loss).   In 2019 the same capital loss should have also been recorded on Form 1040, Line 6 , but we found out (after it was filed) that for some strange reason Turbotax checked off the box on Form 1040, Line 6 "Capital Gain/Loss...Sched D....check box if not required" so no Schedule D and capital loss was recorded on 1040.

 

It was a system glitch, which we were able to fix in a 2019 Amended return which she filed.  Now almost 6 mths later, while IRS acknowledges receipt of the Amended return in May 2021, there is no progress as of today, Sept 2021.   We held off finalizing 2020 return to wait for the 2019 Amended correction to happen.  

 

Her 2020 Amended return is due Oct 15 2021.  If we do not get any resolution from IRS by then, can we take that Capital Loss Carryforward in her 2020 return and then amend the 2020 return, if indeed IRS finally processes the 2019 Amended return?   We don't want to lose the Capital Loss Carryforward.

 

5 Replies
Mike9241
Level 15

Capital Loss Carryforward did not properly flow from 2018 to 2019 return and not record, can we use in 2020?

we can't see the returns so don't know what happened.  however, up to $3,000 of net capital losses can be used each year to offset ordinary income thereby reducing any carryforward. it can take the IRS 4 to 6 months maybe more to fully process the return. 

 

If we do not get any resolution from IRS by then, can we take that Capital Loss Carryforward in her 2020 return and then amend the 2020 return, if indeed IRS finally processes the 2019 Amended return? We don't want to lose the Capital Loss Carryforward. 

 

if you take what you believe to be her correct CLCF on her 2020 return there's nothing to amend unless the IRS changes it. 

akf3
Level 2

Capital Loss Carryforward did not properly flow from 2018 to 2019 return and not record, can we use in 2020?

Thanks.  She was a full time student, so very small figures here, but in reviewing her 1040 again:

 

Had -$1280 carryover into 2019.

Original: $8,287 income, standard deduction reduces taxable income to $0.  No Capital Loss Carryover taken (because Turbotax for some reason didn't let it flow).

Amended: $8,287 income, report -$1287 capital loss, standard deduction makes taxable income $0 anyway.

 

So capital loss carryover actually had no impact, was kind of wasted since taxable income was 0 with or without it.  So, is that it?  She "used up" her capital loss carryover where it had no impact?   Or can she use it for the next year when she has higher income and the capital loss carryover can really be used?

 

VolvoGirl
Level 15

Capital Loss Carryforward did not properly flow from 2018 to 2019 return and not record, can we use in 2020?

Are you using the online version or the Desktop program?  
FYI - 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.

 

Schedule D doesn't actually show the carryover amount to next year. To find your Capital Loss Carryover amount you need to look at your return schedule D page 2.  Line 16 will be your total loss and line 21 should be a max loss of 3,000.  The difference between line 16 and 21 is the carryover loss for next year.

 

And 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.

 

There is also a Carryover Worksheet. There is a Capital Loss Carryover Worksheet showing the carryover from the prior year and the current amounts.  Then there is also the Capital Loss Carry Forward worksheet showing the amount transferring over to next year.

 

In the Online version you have to save your return with all the worksheet as a pdf file to your computer to see the Capital Loss Carry Over and Carry Forward worksheets.

 

In the Desktop program you can go to Forms and find it in the list in the left column.

 

akf3
Level 2

Capital Loss Carryforward did not properly flow from 2018 to 2019 return and not record, can we use in 2020?

Thanks!  Desktop version was used.  And you are right!  Taxable Income is negative without the Capital Loss so it did carryover into 2020.  (I was little confused because on 1040, the Capital loss is reported on Line 6 before the Standard Deduction on Line 9, so I thought we lost the Capital Loss, but since its negative taxable income even without the capital loss, we didn't lose the capital loss and it carried into 2020)

Hal_Al
Level 15

Capital Loss Carryforward did not properly flow from 2018 to 2019 return and not record, can we use in 2020?

You do not need to wait for her amended 2019 return to be processed, before filing her 2020 return, particularly if the amendment didn't really change anything (apparently your case).  Assume the amendment is correct. 

 

In the interview, when TurboTax (TT) presents your capital loss carry forward calculation, if gives you the option to change it, if your records show a different amount. 

 

If your student was  your dependent any of those years, she does not get the full standard deduction (~ $6300 for 2017 and earlier and ~12,000 for 2018-20).  Her standard deduction is limited to ~$1100 or her earned income +$350. If she had other unearned income, including taxable 529 plan distributions, her capital loss carry forward will be reduced, each year.

 

Even if she was not a dependent, she is required to reduce her other income by the capital loss before applying her exemption amount (~$4000) for years before 2018.

 

 

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