Tax Question: Capital Loss Carryover

[TromboneAl]

OK, here comes the first of my 2010 tax questions:

In 2009 I had a net capital gain loss of $4,111. $3,000 of that was used to offset income (went onto line 13 of the 1040).

So I figure that this year, I should enter $1,111 Schedule D as the capital loss carryover (Sched D, line 14).

However, TaxAct shows $4,111 there.

Am I right and TaxAct wrong?

Thanks.

 

[dex]

OK, here comes the first of my 2010 tax questions:

In 2009 I had a net capital gain loss of $4,111. $3,000 of that was used to offset income (went onto line 13 of the 1040).

So I figure that this year, I should enter $1,111 Schedule D as the capital loss carryover (Sched D, line 14).

However, TaxAct shows $4,111 there.

Am I right and TaxAct wrong?

Thanks.

The $1,111 is the correct amount to deduct this year.

 

[bizlady]

The $1,111 is the correct amount to deduct this year.

+1

 

[Gone4Good]

+1

+1, +1

 

[ERD50]

Are you 100% sure the $4,111 loss was before the $3,000 was applied to 2009 tax liability?

Your 2009 Report should give a summary for Tax Carryovers. I always keep a copy of that, and it always gets picked up by Tax Act the next year (I use the paid version for mine, free for the kids). Does the 209 summary show $4,111 or $1,111?

I'd have to look at my 2009 to see where line 13 leads, no time now, but I'll check later.

-ERD50

 

[kaneohe]

Agree w/ ERD50. Check your 2009 Sch D line 16 which is the "gross" loss
http://www.irs.gov/pub/irs-pdf/f1040sd.pdf
before application of the 3K loss. If it's 4111 loss, then 3K would have been applied last yr , leaving you with 1111 loss for this yr.

If it's 7111, then 3K got applied last yr, leaving 4111 for this yr.

or if you can find the loss carryover workshts as ERD suggested.

 

[Nords]

In 2009 I had a net capital gain loss of $4,111. $3,000 of that was used to offset income (went onto line 13 of the 1040).
So I figure that this year, I should enter $1,111 Schedule D as the capital loss carryover (Sched D, line 14).
However, TaxAct shows $4,111 there.
Am I right and TaxAct wrong?

If the return you filed last year indeed offset $3000 of your income, then you're right and TaxAct is wrong.

 

[heyduke]

Agree w/ ERD50. Check your 2009 Sch D line 16 which is the "gross" loss
http://www.irs.gov/pub/irs-pdf/f1040sd.pdf
before application of the 3K loss. If it's 4111 loss, then 3K would have been applied last yr , leaving you with 1111 loss for this yr.

If it's 7111, then 3K got applied last yr, leaving 4111 for this yr.

or if you can find the loss carryover workshts as ERD suggested.

+1

 

[donheff]

Report back Al. You have to buy everyone a beer if you get to keep the extra $3000 deduction.

 

[TromboneAl]

Thanks. It was not 7,111 last year. I will report the bug to TaxAct.

Note that their support has been good (at least at this time of year), I've gotten good responses to my questions/comments.

 

[haha]

Thanks. It was not 7,111 last year. I will report the bug to TaxAct.

Note that their support has been good (at least at this time of year), I've gotten good responses to my questions/comments.

Wow. I think Turbo Tax has no support. Got a problem? Your tough luck!

Ha

 

[ERD50]

Thanks. It was not 7,111 last year. I will report the bug to TaxAct.

Note that their support has been good (at least at this time of year), I've gotten good responses to my questions/comments.

T-Al, IIRC you are switching to TaxAct from something else, right? If so, did it really import your data from last year? I'm trying to figure out if this is an import problem, or are they asking you to enter the wrong thing or some other bug, or ...?

-ERD50

 

[Alan]

Thanks. It was not 7,111 last year. I will report the bug to TaxAct.

Note that their support has been good (at least at this time of year), I've gotten good responses to my questions/comments.

I use TaxAct to do my son's taxes as it has been completely free, including e-filing, since he started working in 2007. I tried it myself at the time but it couldn't cope properly with the foreign pension I have and I reverted back to TurboTax (which is free itself these days).

Having said that, I am impressed with TaxAct and continue to assist my son each year with his taxes. That first year, he had only worked a few months (after graduating) and I first did his taxes using my copy of TT. To get the free e-filing for him we then re-entered everything into TaxAct and it came up with $35 less taxes. It actually spotted a tax credit for low income earners who still contribute to a 401k. It illustrated to me how, even with simple tax returns, mistakes are made.

 

[ERD50]

... we then re-entered everything into TaxAct and it came up with $35 less taxes. It actually spotted a tax credit for low income earners who still contribute to a 401k. It illustrated to me how, even with simple tax returns, [-]mistakes are made[/-]. how complex our tax code is, as even teams of professionals whose job is to come up with the right answer, and provide a guarantee, can't even do it.

fixed it for 'ya

-ERD50

 

[Alan]

fixed it for 'ya

-ERD50

Thanks.

I've read those reports where Consumer Magazine, or Marketplace on the radio, visit lots of tax preparers with the same data for typical tax payers and they always come back with different results, often very big differences.

 

[TromboneAl]

Well, looks like taxact might have been right after all. That $3,000 made no difference to the bottom line of the return, so I can used the entire $4,111 this year. Here's the response from tech support:

Dear TaxACT(R) Customer:

Please see the information below to gain a better understanding of why TaxAct carried forward the $4111 you mentioned in your email.

You may deduct capital losses up to the amount of your capital gains, plus $3,000 ($1,500 if married filing separately). If part of the loss is still unused, you can carry it forward to later years until it is completely depleted. This "unused loss" includes any amount appearing on Line 13 of Federal Form 1040 that is not of benefit to the bottom line of the return. While the amount will appear on that line, the worksheet calculation will take into account that the amount is not actually being used in the current year, and the entire amount will transfer through the worksheet to the following year when import is done from one year to the next.

Any capital loss carryover to the following tax year will be calculated in TaxACT, and if the return is imported to the following year's return, the amount will automatically be transferred.

There are worksheets in the TaxACT program, Capital Loss Carryover and Capital Loss Carryforward, which reflect the amount of capital loss carried over from the prior year and the amount to be carried forward to the following year.

To view either of these worksheets in TaxACT:

TaxACT Desktop Users:
1. Click on the Forms icon in the toolbar to open the Forms View
2. Expand the Federal view
3. Expand the Worksheets view
4. Scroll down and double click Schedule D Capital Loss - Carryover from Prior Years or Schedule D Capital Loss - Carryforward to Next Year


For additional information please refer to the Schedule D Instructions or Publication 550.

Please note that the links in the information above are updated each year automatically. The links will take you to the most recent IRS version of the form instructions or publication at the time it is accessed.


Thank you for using TaxACT. Please let us know if you have any further questions.
TPS-Deb Rowley
TaxACT TaxPayer Support Services

 

[kaneohe]

T-Al: Thanks for the Good reminder educational tutorial. I think my aging brain gets slower putting 1 + 1 together sometimes. I am aware that the 3K loss must be "used" each yr but I am also aware that you can lose, all,some, or none of it depending on one's (usually) low income situation. I am also aware of your low income situation since you stated that at one point here. Yet because it is such a foreign situation to me (not tax efficient like you), that knowledge is somewhat buried and needs to be tilled to be remembered. Thanks for refreshing.

 

[kaneohe]

Report back Al. You have to buy everyone a beer if you get to keep the extra $3000 deduction.

now about that beer..............

one implication is that you need to be careful about the conversions you do to see if they will cause you to lose some of that loss. If they will , then either convert less or more to try to make best use of the remaining loss.

 

[dex]

Well, looks like taxact might have been right after all. That $3,000 made no difference to the bottom line of the return, so I can used the entire $4,111 this year. Here's the response from tech support:

Al,
Does a person have the option of using the $3K or not?
Let's say using the $3K you owe $0 Tax, but not using it you owe $150.00 . Can a person pay the $150.00 and not use the $3K this year and use it next year?

 

[Alan]

Great news Al. Thanks for posting the update and explanation.

 

[ERD50]

Thanks for the update T-Al. It's encouraging to see that TaxAct gave such a detailed, specific response to an individual issue.

I am still confused though.

1) Did you use TaxAct last year, and this is an import from TaxAct, or some other method?

2) What did your Capital Loss Carryover Worksheet from 2009 say?

3) If none of your $3,000 allowance was used, does that mean your AGI was zero? Or that your Taxable income was zero? Or something else?

edit/add #4) If you had -$3,000 on Line 13, where does it get 'dis-allowed'?

Wow. I think Turbo Tax has no support. Got a problem? Your tough luck!

Ha

I dumped TurboTax back when I was bit by a bug and got really PO'd (long story, I'll try to dig up the link if anyone really cares). I had no idea whether TaxAct was really any better though, and I haven't needed their CS yet. I could have been jumping from the frying pan to the fire. So this report from T-Al is good to hear.

PS: It's kinda interesting to see how many posters provided a definitive yes/no answer to this. IMO, tax laws are too complex and the info was a little too vague for a definitive answer, but that didn't stop some people! Heh-heh, it's why I tell DW that I am almost always right - I almost always add a caveat (it depends, I think, I'm pretty sure, almost, usually, rarely, as I understand it, etc, or the really silly cop-out that covers all sins: 'unless I am mistaken' )

-ERD50

 

[Alan]

I read the response as saying that the gains from Al's sales in 2009 were not taxed since his deductions were high enough. If Al did pay taxes and had a combination of interest and dividend income, do the cap gains get applied first so that you can pay taxes, but none of it on capital gains?

e.g.

Deductions = $12k

Cap gains = $11k
Dividends & Interest =$4k

Taxes paid on $3k, but zero on the cap gains.

 

[haha]

Very interesting. Sometimes I also feel like I should override my tax software, but it is usually correct. Taxes are hideously complex.

Ha

 

[FIRE'd@51]

I read the response as saying that the gains from Al's sales in 2009 were not taxed since his deductions were high enough. If Al did pay taxes and had a combination of interest and dividend income, do the cap gains get applied first so that you can pay taxes, but none of it on capital gains?

e.g.

Deductions = $12k

Cap gains = $11k
Dividends & Interest =$4k

Taxes paid on $3k, but zero on the cap gains.

Assuming the capital gains are long-term and the dividends are qualified, no federal taxes would be owed in your example. The deductions offset ordinary income first.

 

[kaneohe]

Al,
Does a person have the option of using the $3K or not?
Let's say using the $3K you owe $0 Tax, but not using it you owe $150.00 . Can a person pay the $150.00 and not use the $3K this year and use it next year?

no such option unfortunately. You must "use" the 3K but it is possible that all, some, or none of it will actually disappear depending on the actual circumstances. There are worksheets , I believe, that will guide you to the correct answer.