If a client doesn't have to file but has a large capital loss carryover, does he lose it if he doesn't file? If he has to file the following year, does he still have the capital loss carryover minus the $3000 he didn't use the year he did not file?
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He doesn't lose it. He may not even be required to "use" the $3,000 yearly loss. Do the c/o worksheet to determine if he can carry over all of it. -
Original Question
I agree that the carryover is not lost. I also agree that it is not automatically reduced by $3000 each year.
I also agree that the worksheet is the only way to accurately determine the amount that is carried forward.
The original question was: Does he lose it if he doesn't file?
If he doesn't file a return, the worksheet won't work properly the following year. You can't just skip a year. You have to follow the instructions on the worksheet, i.e., you have to enter data from the previous year's tax return.
With that being said, if the client isn't required to file, then he isn't required to file. If he files a return the following year, you could probably complete the worksheet accurately by filling in data from the return that he would have filed the previous year.
There is a previous thread on this, from a couple years ago... In some cases, some of the loss carryover erodes each year, even if there is little or no income to absorb it. But in other cases, most or all of the loss is preserved and carried forward. The worksheet is the only way to go. For someone with little or no income, the worksheet involves some rather mind-bending calculations that hinge on whether they have a positive or negative number on Line 41 of Form 1040...
BMKBurton M. Koss
koss@usakoss.net
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The map is not the territory...
and the instruction book is not the process.Comment
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Previous thread
can be found here:
BMKBurton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process.Comment
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Just processed a 2010
Yes it does not seem to be lost, just completed a 2010 return with a carryover from 2009 that carried from 2008, that could not be used and showed $ 3,000 on front page of 1040 and yet my carryover loss was the same as in 2008.
As Koss said, I do have one that really doesn't have a filing requirement, but has capital gains that erode the capital loss carryover each year - so I have her file. The capital loss changes year to year and keeps reducing - yet no tax liability.
I also have a client that has had no reporting for 2008 and 2009, but encourage him to file due to NOL carryovers, as I did not want him to lose them.
Personally I would file - whether or not you charge for the filings is your call.
If you report and have in your software system then at least you have all of the current information needed.
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