Amended Return Secrets

Today TaxMama hears from Troy in San Francisco, who tells us, “I made a mistake on my 2002 and 2003 Schedule D. My losses were greater than I reported. Since I already took the maximum $3,000 loss for 2002 and 2003, the only number affected is my capital loss carryover (not my 2003 Adjusted Gross Income). It doesn’t look like there is a line to fill in on the 1040X for this situation. Since more than 3 years have elapsed on 2002 and 2003 returns, will I be out of luck?”

Hi Troy,

[chuckle] Aahhh, the uninitiated!

There’s a secret to filing a Form 1040X. There’s more to it than meets the eye!

Here it is.

The 1040X is just a summary of all the changes.

The real amended return is the one you prepare showing all the details.

So, redo your 2002 tax return with the increased losses. Attach any worksheets or brokers’ statements to prove the additional losses.

Make a copy of the pages that changed – the Schedule D, and pages 1 & 2 of the 1040. Write across the bottom of the pages – AS AMENDED, preferably in a visible color.

Attach a copy of the relevant pages of the original Form 1040. And write across the bottom of the pages AS ORIGINALLY FILED.

And on the second page of the 1040X, explain that you omitted some sales, or you miscalculated your basis – see AMENDED 1040 attached. And add that this amended return is only being filed to correct the Capital loss carryforwards. It will not generate any additional tax or refunds.

Once this is done, and you have your new carryforward amounts on Schedule D for 2002. Repeat the process for 2003.

Pretty simple if you know the secret, isn’t it?

As to the three years that have elapsed…if you filed your 1040 for 2002 using two extensions, you might still be able to amend today. Just postmark it by close of business today.

If not. You’ve lost 2002. But do 2003 quickly, before April 15th rolls around next year!

Unless! Unless your capital loss is due to a bad debt or worthless securities. Then you have up to 7 years to file that amended return. Just cite IRC 6511(d). You’ll find it here:
http://www.taxalmanac.org/index.php/Sec._6511._Limitations_on_credit_or_refund

And remember, you can find answers to all kinds of questions about amended returns, and all kinds of other tax issues, free. Where? Where else? At TaxMama.com

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