You seem to be very knowledgeable when it comes to taxes, so I hope you can help me out.
I am using the Turbo Tax program and was done answering all the income questions, but when TT checked my return, I got the following message: "Form 1099-B Worksheet.. Capital gn (ls) adjustments/other info (25459W862 SHARES 500 BULL ETF 25) Accrued market discount should not be 0. Enter amount disallowed under wash sale rules, or leave blank if entire loss is disallowed."
I am uncertain what to do about this prompt because I never filled out any Worksheet. Some Turbo tax computer apparently did. My brokerage statement seems to indicate that all wash sale trades have been disallowed since they all seem to be under the "disallowed" column. However, I have two accounts under the same broker, and both have wash sales for the same stock, so I do not know how much, if anything, to list in the "worksheet".
Also, I also do not understand what a 1099-B "Worksheet" is, and I found no listing of such a form on the IRS website. Lastly, I completed a reform on TT last year but did not file the 2019 return, as I did not earn enough to file. However, Turbo Tax has calculated for me a "carry over" loss which ,apparently, is derived from my 2019 return. Since I did not file, could this be a problem?
All of this is very confusing, so I hope you can help by clearing up some of the above.
Thanks : )
If the entire loss is disallowed under the wash sale rules, then you should leave the entry blank, not enter -0-. If you are unsure as to what the loss amount is, I'm sure if you called your broker they could help you with it.
The 1099-B worksheet is referring to a worksheet that will be available when you print out your return. TurboTax generates it and it is for your information and to be kept with your records, but not filed with the tax return.
The loss carryover could be from a year prior to 2019. If you had a loss carryover in 2018, it would be usable in 2020 if you did not file a tax return in 2019.
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I spent some time looking into all this and I think I understand the issue now. The problem involves a single wash sale. The prompt I received from TT wants me check my broker's 1099-B to validate the amount disqualified and enter the correct amount. Well, the disqualified amount was literally one penny (0.01) and Turbo Taxes computers round all amounts, so, apparently, it comes up as a disqualified amount of zero. A disqualified amount of zero cannot be correct because one cannot disqualify a non-existent dollar amount, so they want me to add a "correct" amount. Of course, if I try to enter zero, it is not accepted on the worksheet. If I try to enter 0.01 or .01, such entries are not accepted either. If I leave the worksheet blank, the same thing happens, the error returns in the income wrap up. In effect, the TT online worksheet provided to me refuses to allow me to add the correct amount. So let me pose a different question to you. What can I do about this situation.? Please help or forward this question to someone who can. Thanks : )
I haven't filed since 2016, so could the carry over be from way back then and still be "usable"? I don't really need it, because I have a loss in 2020, so is there a problem simply not using it?
A carryover loss must be calculated each year to carryforward. There is a worksheet depending on what type of loss and it will be use it or lose it. Not having to file a tax return doesn't mean that you still shouldn't at least prepare a tax return every year (though you need not file it), as a record of of your year-to-year long-term capital loss carryover.
Because of certain "oddities" let's say, having to do with IRS ordering rules in the way that deductions are applied against your income (even when an individual falls below the IRS filing threshold), your capital loss may slowly be eaten away -- even if you don't use it.
In short, it's a complicated subject. To understand how long-term capital loss carryovers are treated for those who do not file an income tax return, or who have low taxable income, we respectfully direct you to some of our source materials. The underlying concepts (and some useful examples) are discussed in depth on the following webpage.
It's up to you if you want to lose it completely by not carrying it over. The tax returns not filed, never begin a statute of limitations, which means they are open for all future years. You are not allowed to postpone using it or saving it for a more advantageous time.
It's important to file your tax returns to start that statute of limitations for IRS review.
You can choose to file this return, then amend it later to include the carryover loss once all prior returns have been completed.
As far as the wash sale rules go, you are not allowed to take a wash sale loss, so you can enter a sales and purchase price of equal value and keep a record of the loss and add it to the cost basis of stock you re-purchased. See more information below.
If you sold stock and then repurchased the same stock within 30 days then 'Wash Sale' rules would apply.
- Wash Sale: The wash sale rule prohibits selling an investment for a loss and replacing it with the same or a "substantially identical" investment 30 days before or after the sale. If you do have a wash sale, the IRS will not allow you to write off the investment loss. Instead this loss gets added to the cost basis of the stock that is still owned until it is sold at a later time without any repurchase within the same time period noted.
[Edited: 02/21/2021 | 12:23p PST]