Question

Can Unreported Capital Loss from 2018 Carryover to 2021 Tax Return?

Forum|Forum|5 years ago
November 18, 2020
3 replies
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Bit of an interesting scenario here: capital loss from 2018 was unreported because I was a dependant and didn't think I had to report (never received notifications from IRS, made an online account, and didn't see any notices there either so I hope I'm safe). Also because I was ignorant about dealing with finances.

1. Wondering if I could offset this year's gains using those losses.

2. Should I be concerned about not reporting in 2018 and follow up somehow?

Thank you.

TurboTax Free Edition Online

A

Anonymous

since you did not file previous returns, you can expect a notice from the IRS if a capital loss carryover starts showing up on the 2020 return. you need to complete the 2018 and 2019 returns. you'll need desktop software or you could get the forms from the IRS to manually prepare them. the issue is not only that the capital losses were not reported but what about dividends and other income that could use up some of those losses. without proper preparation of 18 and 19, you'll have no way of knowing what the correct CLCO to 2020 is (filed in 2021)

https://www.irs.gov/forms-pubs/prior-year

G

GreyGreyAuthor

@rjs @12309 Gotcha. I should've also mentioned that 2018-2020 I was a full-time student making no other income and also pulled the remaining money out. Would it be simpler if I just leave 2018 losses alone and start off fresh? In the long run, I'm not going to lose sleep over the losses anyway.

Critter-3

If your income was below the filing requirement then that is why you have not gotten an IRS letter yet ... but until you review all the returns you cannot make an informed decision.

rjs

Employee

You can't skip years. A capital loss carryover has to be carried over from year to year until it's used up. In order to use the loss at all, you have to file a 2018 tax return reporting it, even if you have no other reason to file. If the loss isn't used up in 2018, you have to carry it over to 2019, then to 2020. If you filed a 2019 tax return you will have to amend it to include the capital loss carryover. Then you will be able to enter the information from your 2019 tax return in TurboTax for 2020, so it can calculate the amount that is carried over to 2020, if any.

For all years, when TurboTax asks if you know the carryover amounts, do not answer Yes. Select the option that says you need help figuring out the carryover amounts.

You don't have to wait for your 2018 and 2019 original or amended returns to be processed by the IRS before you file your 2020 tax return, but you need the information from the recalculated 2019 tax return in order to correctly calculate the capital loss carryover to 2020.

And by the way, being a dependent does not mean that you don't have to file a tax return.

Hal_Al

Employee

Q. Can Unreported Capital Loss from 2018 Carryover to 2020 Tax Return?

A. Yes, but the amount must be reduced by the amount of loss that should have been claimed on your 2018 and 2019 returns, even if you were not required to file returns for those years.

The best way to determine what the amount of the reduction was is to actually prepare 2018 and 2019 returns, even if you don't actually file them.

Lacking that, a simple rule is to just reduce the amount by $3000 per year (the maximum allowed capital loss deduction). But, a student who has no other income most likely was allowed to carry the full amount forward, each year. The rule is: if your standard (or itemized) deduction is greater than your AGI, without the capital loss, then all capital loss is carried forward.

Note: student-dependents do not get a full $12.200 standard deduction. A dependent's standard deduction is $1100 or his earned income + $350.

"also pulled the remaining money out" indicates you may have sold investments, realizing additional losses or gains that should be combined with the loss carry forward on calculating the next year carry forward.