What if you didn't document tax loss carryforward every year ?

[tdog66]

I'm not so sure the IRS will allow you to go back and recalculate your taxes from almost 10 years ago ? I mean from what I read it said you must claim the maximum allowable amount of 3K (or 1500 if MFS) in the year that the loss was realized in order to correctly carry it over into the following years. Also you said that he doesn't have to amend his 2008-2011 filings and while that may be true he DOES have to recalculate them for the purposes of getting the CORRECT carry over of capital losses !!! In 2008 to 2011 he may not have been eligible to take the 3K loss. With no way to look at it how can we be sure? There in lies the problem. Without an ACCURATE calculation of the carry over loss amount the IRS is not going to allow it. If that were the case I could just make up a loss from 10 to 15 years ago and carry it over each year until I die.

[tdog66]

Yes. Hals answer sounds correct. You cant carry over your losses accurately if the IRS cannot review your "personal deductions" from 9 years ago to see if your even eligible to use a 3K capital loss carry over almost 10 years late AND to get the CORRECT amount that you are attempting to carry over for subsequent years.

[tdog66]

The initial people who answered are forgetting that "personal exemptions" affect your 3K carry over. It may actually reduce it so whoever is telling this guy that his 2008-2011 tax returns don't come into play are wrong. They very much DO come into play and there in lies the problem. I would actually ask Hal because he is right. This becomes a huge problem and it IS very complicated. He did not keep a carry over record for at least 8 past tax filings. IRS will definitely see this as a problem. Like I said earlier, he can try it but I doubt it will go through.

[dmertz]

While lack of records may complicate the determination of the amount of loss carryover that remains available to be reported on tax returns for years that are still open, it does not change the necessary process for doing so.  For each closed tax year (2008-2011) the amount of loss that *should have been* reported must be calculated and reduces the amount that remains available to be reported  on the amendment for 2012 and beyond.

It seems that your concern might be that the loss carryover would be mysteriously (to the IRS) appearing on the amended tax returns without having been present on the 2008-2011 tax returns and that this might raise a red flags with this IRS.  However, this is addressed with properly prepared explanation statements included with the amendments.  These explanations should show the amount of loss carried over from 2007 and the reductions from that amount attributable to the applicable loss determined from each of the recalculated tax returns leading up to the tax return being amended.  If the IRS finds that explanations insufficient, the IRS might ask to see amended 2008-2011 tax returns to substantiate the numbers in the explanations, but amendments for 2008-2011 would not result in any tax refunds for those years.

[davejunkmail123]

Thanks for everyone's comments !  

Is the an easy way to tell if a TT file was generated independently or imported from a previous year ?   Long story but this person did not file all the returns "in order" - some years were skipped, done later, real mess.  We have what we think are native TT files from each of the years (and outputted  PDF).

Look for way to confirm if, for example, 2010 return submitted was started from 2009 import (or started independently).   There's a lot of transactions and complications - so it is not obvious from looking at submitted PDF that "import" was used to initiate each year.

[dmertz]

The loss carryovers would be shown on TurboTax's Federal Carryover Worksheet.  With this sheet opened in TurboTax's forms mode, a value transferred from the previous year's tax return and not subsequently modified would be shown in green.  On the PDF of this worksheet it won't be possible to tell if the amount in the previous-year column transferred from the previous year's TurboTax file or was instead entered or modified from what was transferred.  However, you can compare the Federal Carryover Worksheets from one year to the next to determine if the carried-over amount agrees with the previous-year's tax return.  If the amounts do not agree, you can do a pro forma (for years prior to 2012) or and actual (for 2012 and later) amendment to use the amount that should have carried in from the previous year and determine the amount that carries over to the following year.  Each amended year would feed the amendment for the next.

[davejunkmail123]

Thanks. I guess I'm going to have to install several years of TT - I'm assuming/hoping it is possible to have multiple years installed.  The 2009 information I have is the native .tax2009 file (can't be opened by TT 2014 installed) and the "to the IRS" PDF (which does not include above worksheet).

Stupid question please: On 2009 Schedule D, Line 6, "Short term loss carryover" -- this is this the amount carry-overed from 2008 to 2009, correct ?  It is not amount to carry over to 2010.

If above correct, then if a return has a negative dollar amount on 2009 Sch D Line 6 - it would mean that TT "imported information from previous" year (from 2008).   

The year that has nothing on that line "broke the chain" of carryforwards - and from that  "broken chain" year I need to redo the tax year and properly import from previous year.

You all are amazing in your expertise and willingness to help !  Thanks.

[Critter1]

Sch D line 6 is the prior year Short term loss carryover amount ... line 14 is the long term  and they were either entered or imported.  

If there is nothing on the line and there should be are the years that need help. Then from the first year fixed you may need to adjust all the years going forward.

[Critter1]

<a href="http://www.irs.gov/pub/irs-prior/f1040sd--2009.pdf" rel="nofollow" target="_blank">http://www.irs.gov/pub/irs-prior/f1040sd--2009.pdf</a>

[mesquitebean]

Multiple years of TurboTax can co-exist on the same computer at the same time.  The problem with some of the older years installed from a CD is that they *may* no longer update.  TurboTax doesn't officially support prior to 2011, so I'm not sure if those older CD's will update, or if the state program can be downloaded (if applicable).   CD's come out very early in the season and have the early season forms prior to updates and finalizations.  If you had download installation files for those years, however, they might be more up-to-date since the ones in your download account are updated periodically.

[Critter1]

You may have to result in just using paper forms that you can get from the IRS : <a href="http://www.irs.gov/Forms-&-Pubs" rel="nofollow" target="_blank">http://www.irs.gov/Forms-&-Pubs</a>

[dmertz]

My experience about a year ago installing versions of TurboTax from CD back through 2008 was that the Federal portion *did* update to the final release version for each year.  I wasn't purchasing the state programs back then, but I don't think that the states from that far back will download.

Expect to need to redo tax returns from the year where the chain was broken and forward.

[mesquitebean]

Thanks, dmertz.  That's good to know.

[tdog66]

davejunkmail your best option is to do it by paper form line by line. The TT approach will run into software issues since you are attempting to go back so many years ago.

[jbbafl]

I may be mistaken but it is my understanding that if you file your tax forms late,  even if you don't owe any taxes and only suffered losses, your lateness causes you to become ineligible to carry your losses over to the next year, or any future year for that matter. In the spirit of clarity I will say this again differently by way of example,. If you only incur losses in the year 2020, let's say $23,000, and you file your tax forms as you're supposed to regardless of gain or loss, if you send them in late, you will not be allowed to use any  portion of your losses in future years to offset any potential gains or income. It will be your penalty for sending your tax forms in late.

You will have forfeited the use of the $23,000 in losses for all time. You would have to incur a year of NEW losses AND file your tax forms on time in order to carry your losses over to the following year. I suspect that not filing your tax forms at all when you are required to so is equivalent to filing them late. Unfortunately, the IRS does not accept excuses such as, "Oh no, I thought that if I invested in the stock market and only lost money I wouldn't have to file taxes!"