Should I amended my 2017 return before filling 2018 first?

[user53165]

I have just found that my CPA didn't include my trading loss (53k) in my 2017 tax return on schedule D. They seem to recognize that mistake and will amend my 2017 return.  This year (2018) I decided to file with Turbotax. I read that it takes IRS up to 3 months to process amended returns. So my question: should I file my 2018 return as if I didn't have those losses in 2017, then wait for IRS to process 2017 amendment and AFTER that amend my 2018 return or should I just include those losses in 2018 return from the new version of my 2017 return while IRS processing that amendment?

[dmertz]

The initial IRS processing of your 2018 tax return does not look beyond your 2018 tax return, so the fact that it may take the IRS several months to process your 2017 amendment is not a concern.  If your CPA completes the 2017 amendment before October 15, just use any carryover amounts from the amended 2017 tax return when preparing your 2018 tax return.

Otherwise, if your amendment to the 2017 tax return will not result in any capital loss carryover or any changes to any other carryover amounts, your 2018 tax return will be unaffected by the amendment and there is no reason to delay filing your 2018 tax return.  Also, if you will have no balance due with your 2018 tax return, filing late will not result in any penalty or interest since and penalties and interest are based on the balance due.

If filing late would result in penalty or interest, you are probably too close to the extended filing deadline for 2018 tax returns to delay that filing any more.    If your amended 2017 tax return will have either a short-term or long-term loss carryover or a change to some other carryover, your choice will be to prepare your 2018 tax return as if you were not going to amend 2017, then amend 2018 to incorporate the changes after amending 2017, or prepare your 2018 tax return using the anticipated carryover amounts that will be shown on the amended 2017 tax return (then amend 2018 if those anticipated amounts end up being incorrect).

Online TurboTax will close for filing 2018 tax returns shortly after October 15, so if you want to file after October 15 you'll need to use the CD/download version of TurboTax.

[user53165]

Hi thank you very much for your answer!

I am a little confused however by this: "If filing late would result in penalty or interest, you are probably too close to the extended filing deadline for 2018 tax returns to delay that filing any more.    If your amended 2017 tax return will have either a short-term or long-term loss carryover or a change to some other carryover, your choice will be to prepare your 2018 tax return as if you were not going to amend 2017, then amend 2018 to incorporate the changes after amending 2017, or prepare your 2018 tax return using the anticipated carryover amounts that will be shown on the amended 2017 tax return (then amend 2018 if those anticipated amounts end up being incorrect)."

My situation: I will have penalty and interest. I will have both short and long term carryovers which will be in the new version of my 2017 tax return (Amended) I must file by October 15th. No doubt.

So should I use anticipated carryover amounts in my 2018 tax return WHILE the IRS processes my amendment for 2017?

[dmertz · Accepted solution]

Yes, use your anticipated carryover amounts, particularly if the CPA can provide you with those amounts before you file your 2018 tax return.  The fact that the the IRS may still be processing the 2017 amendment will have no effect on the initial IRS processing of your 2018 tax return since the IRS only looks at your 2018 tax return for initial processing.  Any correlation of your 2018 tax return with prior year tax returns, if the IRS does any at all, will likely occur no less than a year after filing your 2018 tax return.

[user53165]

I would like to ask two more questions if you don't mind answering:

1. my accountant just called me and said that since I traded options on futures those losses cannot be carried forward. Is that true? They prepared Form 6781: Gains and Losses From Section 1256 Contracts and Straddles in my 2017 return. 

2. Can I amend my 2017 tax return using turbotax CD version myself even if I didn't file 2017 return with TT?

[dmertz · Accepted solution]

1.  I'm not familiar with the reporting of options trading.  I was referring to changes to the carryover of short- and long-term capital losses and any other carryovers that might affect your 2018 tax return.

2.  Amending 2017 using TurboTax you would first have to recreate in 2017 TurboTax your originally filed tax return, then perform the amendment.  Given that you mentioned options trading, it's likely that recreating your originally filed 2017 tax return with 2017 TurboTax would be an onerous task.

[user53165]

understood. thank you