Do I need to file?

[sagar40]

I am single filer living abroad.

I have only passive income from dividends of $7300, interest of $386 and taxable capital gains of about $36,000 in 2023.  

Turbo tax and IRS calculator both show as zero tax due and zero refund due.

Do I still need to file?

If I do need to file, how do I carryover capital loss from 2021? Turbotax live software seems to allow only carryover from 2022. I did not file in 2021 or 2022 as my gross income was below the standard deductuion. 

Thanks.

[rjs]

If you have a capital loss carryover you have to file every year in order to maintain the carried-over loss. You cannot skip a year. The loss has to be carried over from year to year until it is used up. You cannot use a capital loss carryover from 2021 on your 2023 tax return.

So you have to file a 2022 tax return, even if you are otherwise not required to file. And you also have to file a 2023 tax return.

[VolvoGirl]

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.

You have to report the carryover every year until it's used up. You can't skip a year. Even if you don't report it on your return you have to reduce it by the 3,000 (1,500 MFS) when you carry it over to next year. You can't choose when to use it.

This is from the IRS Pub 550 page 66....

"When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year. "

IRS Pub 550 https://www.irs.gov/pub/irs-pdf/p550.pdf

[sagar40]

These folks at CountingWorks say it well:

Bottom line, there appears there is no actual requirement to file a return, where one is not otherwise required to be filed. However, since the carryover is based upon the results of a prior year return, the taxpayer would have to be able to reconstruct the prior year return to prove the carryover if challenged on the amount of the carryover.

Best Practice: That leads us to believe that the best practice may be to actually file a return and run the statute of limitations even though it is not actually required.   

https://www.taxcpe.com/blogs/news/preserving-capital-loss-carryovers

[rjs]

Your original question was how to carry over a capital loss from 2021. But looking it over again I just noticed that you also said you did not file for 2021. If you did not file, then you don't have any loss to carry over. It's not clear when the capital loss originally occurred. You absolutely have to file for the year that the loss occurred, in order to establish the loss, even if you don't file for all of the intervening years.

I would follow the advice that you found at CountingWorks and file for every year.