switching from MFJ to MFS - how to amend 2023 Capital Loss Carryover on both returns with TurboTax Premier 2024

[bearchris19]

Hi, wife and I decided to switch from Married Filing Jointly (“MFJ”) to Married Filing Separately (“MFS”) for Tax Year 2024.  Our 2023 MFJ return showed a Loss Carry Over balance of $30k from our jointly owned investment account (registered in both names).  How do we split/allocate this $30k evenly to our new MFS returns?  My MFS return is a rollover/transfer from 2023’s MFJ file.  Wife’s MFS return is a newly created return.  Kindly advise how I can manually reduce $15k of Loss Carry Over on my return and input the same $15k to my wife’s return.  TIA

After reading prior community posts, I searched Capital Loss Carryover on TurboTax Assistant.   Clicked on prompt “Add/edit capital loss carryover info” and hype-linked to an Investment screen “Info from your 2023 tax return” with 8 amounts (Net short-term capital gain/loss, Net long-term capital gain/loss, Allowable loss, Income before exemptions, Net AMT short-term capital gain/loss, Net AMT long-term capital gain/loss, AMT allowable loss, AMT taxable income). 

To do a manual transfer - is it just a simple edit (divide by 2) of the above 8 amounts on my 2024 return and then input the balancing differences to my wife’s 2024 return?   

Also am I approaching this MFJ to MFS switch correctly on TurboTax?

Thanks again for your time and assistance.  Much appreciated!

[Mike9241]

split 50/50 

[bearchris19]

good evening Mike9241, thanks for your msg ... i am aware it's a 50/50 split between the 2 MFS returns ... i need to know how to go about to amend the $30k currently on my MFS return down to $15k - do I just edit all 8 figures with a 50/50 split?  TIA

[DianeW777]

Yes. As stated by Mike9241, you split it evenly between you and there's nothing to amend for 2023. An amended return is not required in this situation.

Note: You can amend a return to change from Married Filing Separately to Married Filing Jointly but not from Married Filing Jointly to Married Filing Separately unless you do so prior to the original filing deadline without extensions. So, once you file a joint return you cannot change it to a separate return if the filing deadline has already passed.

• How to change your tax filing status

@bearchris19 

[BillM223]

1. "I did not have a HPDP plan in 2024; " I want to make sure, since you are filing MFS that you are not saying this because your spouse had the HDHP policy, so you feel like maybe you can't claim it MFS. The HDHP coverage is independent of the filing status.

2. "One complication is that if the employer does not remove 12W on W2c," The IRS permits the employer to take back the HSA contribution if you were not eligible and they should have known that (like if you had regular health insurance through them, then they should have known better). If your employer would agree to this, then, yes, they would take the $2,500 back as well as issue you a corrected W-2. BUT if the employer won't do this, then they won't/can't give you a corrected W-2.

3. Lacking a corrected W-2, you will have to go through TurboTax to handle this. NOTE: TurboTax will do the calculations and the adding of excess back to your income - please do not do this yourself in Forms mode. You go into the HSA interview, tell TurboTax that you did not have any HDHP coverage (having HDHP coverage when there is conflicting coverage is the same as not having HDHP coverage), then TurboTax will report an excess of $2,500 which will be added to Other Income automatically. Yes, you will contact the HSA custodian before April 15th to ask for the "withdrawal of excess contributions". 

4. Then, sometime before next tax season, you will get a 1099-SA that you will enter on your 2025 return. Because the distribution code will be "2" on that 1099-SA, the amount of excess in box 1 will not be added to your 2025 return because it was already added to your 2024 return, but the earnings in box 2 will be added to your 2025 income, as it should be.

5. As for the issue you are having with TurboTax demanding an answer of Self or Family in the Review, it would be OK to answer either, because you have already told TurboTax that you did not have any HDHP coverage, so all the numbers on the 8889 are correct. Answering Self or Family is just to get around this issue in the Review that holds you up.

[Tax2019Pay]

Hi BillM223:

A big thank you for taking time to respond. much appreciated. 

[BillM223]

I am not sure that I understand your intentions, but if your employer removes the contribution from the HSA by contacting the HSA custodian directly, then any corrected W-2 will have the code W amount removed. This means that TurboTax won't know that you have an HSA, and you will not indicate that you have an HSA in the "Tell us about your health accounts" screen.

At the same time, if the employer had previously removed the code W amount from Wages in boxes 1, 3, and 5 (as they should have), I imagine that they will add the Code W amount back to Wages in those boxes. I am not sure what your employer intends to do about the dollars that were supposed to go to the HSA which now have been withdrawn. With these dollars be distributed to you? I don't know.

As for being taxed twice, that should not happen because, as I said, if the employer removes the $2,500 from the HSA themselves, then the employer should also remove the Code W code and amount. In this case, if you follow what I said above, you would not even report an HSA, so TurboTax will not add back anything. What your employer does with Wages is unknown to me (see paragraph above).

As for your last questions. I will repeat my final statement previously:

As for the issue you are having with TurboTax demanding an answer of Self or Family in the Review, it would be OK to answer either, because you have already told TurboTax that you did not have any HDHP coverage, so all the numbers on the 8889 are correct. Answering Self or Family is just to get around this issue in the Review that holds you up.

And you won't have to click NONE per month, because TurboTax will ask you first if you had any HDHP coverage at all, to which you will answer No. Then you will never see the month by month screen.

[Tax2019Pay]

Thank you again.

[BillM223]

When you file the withdrawal of excess contributions request with the HSA custodian, the HSA custodian will send you a check for that amount. Since it will be added to your Other Income when you go through the HSA interview and tell TurboTax that you never had HDHP coverage, you will not only have the money, but you will have paid tax on it, too.

So if your employer removes the money from your paycheck, you will be left short, because they will take the $2,500 but leave you paying tax on that.

So tell your employer that you are OK. Please do not take any money out of my paychecks. The $2,500 will be added to my income and I will pay tax on it, and everything will be good. This also means that they don't need to make a corrected W-2. You need that code W in box 12 to trigger what's going to happen in the HSA interview. 

Steps 4, 5, and 6 are fine.

[Tax2019Pay]

Thanks

[BillM223]

1. Your employer will need to add the excess to boxes 1, 3, and 5. Perhaps they have forgotten that they removed the HSA contribution from all three boxes.

2. OK

3. OK

The problem with all this is that your paperwork will not match that of the HSA custodian. The employer is pretending that they did not make that contribution when they did. You will be removing excess contributions, but your tax return will not show that you had any excess contributions.

OK, the way to do this correctly is for you to ask your HSA custodian if you can declare this to be a contribution in error, and that you would like to correct this. The HSA custodian will likely say that you did not make the contribution but your employer did. All you can reply is that the employer won't retrieve the contribution and they are changing the paperwork to pretend like they never made it, so if the HSA custodian won't let your retrieve the contribution, that you will end up owing income tax on it, not have the money anyway, and your 8889 will be hopelessly fouled up.

May I quote you from above? "So I end up doing all the works for silly mistake by the employer. " Maybe you can have the employer call the HSA custodian and ask them to honor your request.

OK, the HSA custodian does not have to honor your request, so be very nice to them and even grovel at their feet if need be. If the HSA custodian will return the contribution, they will send you a check for the amount. If they will do this, then the corrected W-2 will be correct, with no code W, you won't have any excess contributions to report, and you won't care if your employer takes the code W amount out of your paychecks because you already have the money.

[Tax2019Pay]

thanks

[BillM223]

If you do not have a code W on the corrected W-2, and if you do not indicate that you have an HSA when you are asked about "Tell us about your Health Savings Accounts" screen, then there will be no 8889, which is fine.

As I may have told you before, please do not make entries directly on the forms, especially the 8889. It probably prevents you from e-filing, it is likely to negate your Tax Accuracy Guarantee, and it is very difficult even for tax professionals to fill in the 8889 correctly. So, no 8889, no excess contributions added to Other Income, no double taxing of your money, and finally, no problem.

You will get the money from the HSA custodian, and you will pay tax on it because of the changes to the W-2. All good.