Should I amend my 2023 return?

[Snowy_Desert]

Hello,

I just realized while working on my 2024 (Not filed yet), that I totally missed updating the cost basis for my ESPP sold in 2023. I should have used the adjusted cost basis, but instead, I left it as is from the 1099-B form. I basically double taxed myself. This resulted in a loss of about $2k. I currnetly carry a loss of 32K, but if I amend, the loss would go to $34K. However, I am unsure if A) Whether to amend my 2023 or just leave it alone since it is not anything I owe the IRS. Or B) Amend, but then do I wait until the amended return is accepted before filing the 2024 to reflect the accurate data from the 'previous year'. 

Also, do I also amend Arizona state return as well?

[ThomasM125]

You should amend the 2023 return as you can't take the additional loss deduction properly without first adding it to the 2023 return. Even though it is not immediately deductible, you may be able to deduct it in future years, but you must carry it over properly. You don't need to wait until you amend the 2023 return to file your 2024 return as long as you enter the correct loss carryover on it.

You should prepare the Arizona amended return to see if the tax changes but you don't need to submit it if there is no change in tax, as that return does not track loss carryovers.

[Snowy_Desert]

Thank you so much! Quick follow up question, regarding ‘You don't need to wait until you amend the 2023 return to file your 2024 return as long as you enter the correct loss carryover on it’. Should I start 2024 from scratch and use the amended 1040X so it pulls the correct carry over loss number from 2023? Or is there another manual way to add that $2k loss in the 2024 return? 

[AmyC]

Any method you like is fine. You can manually enter a carryover loss. Once you have finished your 2023, look at your Sch D for the amounts to carry over. See How do I enter my capital loss carryover?

[Snowy_Desert]

Sounds good.  But would TurboTax give me errors on where I got the extra $2k from if I add it manually? Sorry for the extra questions. 

[MindyB]

No, you will not get an error for adjusting your carryover. 

Here is an article you may find helpful: How do I enter my capital loss carryover?

[Snowy_Desert]

The only interview questionI see in that section for 2024 is "Are your carryover AMT amounts different?" - Which has 'Uncommon' disclaimer on it. Do I select yes on that one? If so, do I then put the updated Sch D lines 7 and 15 from the 'to be amended' 2023 return?

[Snowy_Desert]

Additionally, TT is telling me that it is not detecting any differences between my original 2023 and the amended one and it is asking me to put an explanation which I did, but I am now wondering if amending is absolutely necessary? I'd rather not amend and go through the hassle unless I am absolutely required.

[DianeW777]

It depends.  If the capital loss carryover has changed from your original return, then you do want to file the amended return.  This would not change your numbers for your 2023 income tax because you would still be limited to $3,000 capital loss. Be sure to send the Schedule D and/or Form 8949 with your 1040-X.

No, the carryover AMT amounts should not be different. Do not make changes for this on your Schedule D.

[Snowy_Desert]

Hi @DianeW777 - Thank you for the reply. I just checked the original 2023, the draft (to be amended) 2023, and the 2024 (in progress but ready to be filed). Please view below and let me know your thoughts. 

Line 14 Sch D:

Original 2023: $-35,775

To amended 2023: $-35,775

2024: $-35,074

Line 16 of Sch D:

Original 2023: $-38,074

To amended 2023: $-40,693

2024: $-35,080

[DianeW777]

It appears you have added the additional cost basis, which you indicated was approximately $2,000 difference.  However the carryover is close to the same amount. This factors in everything on your Schedule D for 2023, so if these numbers are correct for the appropriate sale(s) you should proceed with your amendment and file your 2024 with the correct capital loss carryover.

Arizona will be looking for an amendment when the federal is filed.  If there are no changes to AZ you can explain should they inquire.

@Snowy_Desert 

[Snowy_Desert]

@DianeW777 Thank you so much! This has been very helpful.

I promise, this is the last question I have:

Since TT does round up numbers to the nearest dollar, the exact difference is about $2 more than my box 14 (after I adjust cost basis). Is that alright? Since I am amending, I want to make sure I don't make another mistake to correct a mistake :( 

[DianeW777]

Yes, that's perfectly all right. Rounding has been used since I can remember and it's quite normal to have a couple dollar variance.

@Snowy_Desert